Once again, we've had good investment performance for another financial year across each of our investment options. We've summarised the results below and of course there will be more detail in your annual member statements which will be issued to you in mid September.

Thank you to those of our members who recently participated in our annual member satisfaction survey – your feedback on what we are doing well and where we need more improvement is very important to us, and we look forward to sharing the results with you late in the year.
 

Investment Growth

3%

Concerns of trade tensions and tightening of monetary policy is a key risk

Global economic growth remains robust, but the theme of synchronised global growth appears to be changing. US economic growth remains strong and will benefit from fiscal stimulus over the near term. However, there are signs of deterioration in the outlook for Europe, and political uncertainty rising. In Japan, economic growth is also weakening.

Australia's headline GDP growth has been strong with business conditions remaining positive and employment growth being solid. However, there remain concerns with household debt levels, a softening in the residential property market and the Royal Commission providing uncertainty on credit growth.

Monetary policy has continued to tighten globally but remains very accommodative. The US Federal Reserve increased its interest rate during the quarter with expectations of future rate rises, however these may be relatively limited. The European Central Bank (ECB) announced it intends to end its quantitative easing program by December 2018 and interest rate rises are unlikely for some time.

Inflation and wage growth has remained relatively low but has risen slowly. Economic slack and labour market indicators continue to suggest inflationary pressures are building (particularly in the US) and if inflation starts to accelerate, central banks will be under pressure to raise rates faster than anticipated.

In China, fixed asset investment and credit growth are slowing. This is to be expected as the Chinese economy transitions and the Government targets deleveraging (particularly the "shadow banking" sector’s excesses). A China hard landing is a low probability as authorities have demonstrated the capacity and intent to stimulate the economy when required but for now there appears to be some cyclical slowing.

Emerging markets, particularly currency, but also equity and debt markets, have been negatively impacted by the recent appreciation of the USD, rising US interest rates and concerns around trade. The impact has been largest in countries with current account and debt vulnerabilities such as Turkey, Argentina and Brazil, but negative sentiment and capital outflows have been broad based.

Trade tensions have been a major development over the quarter. The ultimate impact is difficult to forecast as there are a variety of flow through reactions including substitution, redirection of trade, supply chain management and foreign owned investment (e.g. Apple operating in China). Over the medium to long-term the US is expected to be negatively impacted by these actions and in the short-term any benefits could be offset by USD appreciation and retaliatory actions. Australia has a trade surplus with the US and therefore may be relatively less directly impacted, and although China is the major target the biggest impact is probably more likely to be felt by US neighbours Mexico and Canada, and other Asian countries (e.g. Vietnam, Malaysia, Thailand, Taiwan, South Korea and Singapore).

Income Stream Investment Returns (net of investment fees) to 30 June 2018

Past performance may not be an indicator of future performance. Taxes generally do not apply for income stream accounts.
# Your income stream will be invested in our Growth Option (for accounts opened prior to 1 July 2015) or Cash and Balanced Growth Options if you don't make an investment choice.
* The Balanced Growth option was introduced on 1 July 2015
The investment returns for the quarter and the financial year to date detailed above are real investment returns for the period shown, not annualised or 'per annum' returns which may differ from the numbers above. /span>

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e. avsinfo@avsuper.com.au
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