Are current cash returns impacting your investments?
08 March 2021
5
min read
Returns from cash have entered a ‘new normal’ and are expected to move lower. Should this affect your investment strategy?
The outlook for the economy has improved, but Reserve Bank Governor Philip Lowe said it was likely to be a bumpy and uneven path ahead, and interest rates in March were kept on hold at the historic low level of 0.1%.1
The low-rate policy is expected to stay for a while, with the RBA in February ruling out rate rises until 2024 at the earliest.2
This ‘new normal’ for cash returns means returns from cash are expected to move lower and could likely become slightly negative on an after-fee basis, in the order of -0.1% a year.
All investors in the market right now must contend with these historically low rates.
It is not only QSuper members invested in our Cash option who are affected by low cash rates.
Members invested in the QSuper Moderate option and the Lifetime Sustain options, which have significant investments in cash assets (close to 60% for Moderate and Sustain 2, and more than 40% for the Sustain 1 option), are also affected.
What do lower cash returns mean for you?
The key message is that you may wish to factor the lower-return environment into your investment strategy.
Cash may still be entirely appropriate for some investors.
It’s worth remembering, however, that the investment horizon for cash is one year or less. This means cash may be less appropriate for investors who are years away from retirement.
Often the best response in uncertain times is to hold a truly diverse investment portfolio.
Diversifying your investments
QSuper offers a suite of diversified options. We maintain that the best long-term guide to an investment option’s outcomes is its investment objective.
For example, the QSuper Moderate option (a portfolio with close to 60% cash assets and 40% growth-oriented assets such as property, infrastructure, and equities) has the objective of achieving an annual return of CPI +2.5% (after fees and tax): approximately 5%.
The table below shows the objectives for each of QSuper’s diversified options and corresponding time horizons. These are minimum timeframes. Those investing in Moderate, for example, should have more than three years to invest.
| Cash |
Match the return of the Bloomberg AusBond Bank Bill index |
Less than one year |
| Lifetime Sustain 2 |
CPI + 2.0% return p.a. |
2 years |
| Lifetime Sustain 1 |
CPI + 2.5% return p.a. |
2 years |
| Moderate |
CPI + 2.5% return p.a. |
3 years |
| Balanced |
CPI + 3.5% return p.a. |
5 years |
| Socially Responsible |
CPI + 3.5% return p.a. |
5 years |
| Aggressive |
CPI + 4.5% return p.a. |
10 years |
* All objectives are after fees and tax. The Balanced option investment objective is measured over rolling ten-year periods. Past performance is not a reliable indicator of future performance. Each of our options has a different objective, risk profile, and asset allocation. Visit QSuper’s Investment Options for more detailed information. Changes to inflation, fees, asset allocations, option objectives, and risk play a significant part in the return of any investment option. These figures have been rounded for reporting purposes.
Need some advice?
Professional guidance can help you to make informed, confident decisions and achieve your goals. QSuper members can access advice about their super at no additional cost. You can find out more about financial advice options at qsuper.qld.gov.au/advice or by calling us on 1300 360 750. This advice includes a review of your QSuper account investment strategy.
1. Media Release, 2 March 2021, Statement by Philip Lowe, Governor: Monetary Policy Decision, Reserve Bank of Australia at rba.gov.au
2. RBA, 5 February 2021, Opening Statement to the House of Representatives Standing Committee on Economics by RBA Governor Philip Lowe, at rba.gov.au