Investor Update: Q2 2022

Overview

The second quarter of 2022 has been characterised by significant changes in Australia’s financial and political landscape. Most noteworthy is the recent federal election victory of the Australian Labor Party (ALP), in addition to rising inflation and significant cash rate rises implemented by the Reserve Bank of Australia (RBA).

Strong inflationary pressures in the economy resulted in the RBA raising the cash rate rapidly from a low of 0.10% in May to 1.35% in July. This has seen variable interest rates for Arcana’s non-recourse debt facilities move from the low to mid 2% p.a. range in early 2022 to the current high 3% p.a. range. Markets now expect further significant rises in interest rates into 2023. We note that this has occurred despite earlier advice, on several occasions, from the RBA indicating that the cash rate would not rise until 2024.

In recent weeks, some property agents have reported reduced buyer interest and there is early market evidence of passing yields in some sectors beginning to soften.