After the tribulations of this year, many Australians will be looking at 2023 with a degree of trepidation.
However, generally the experts are tentatively predicting a more positive outlook for the twelve months to come.
AMP Chief Economist Dr Shane Oliver, while acknowledging 2023 is likely to remain volatile, has given his predictions for the year to come, and expects to see somewhat improved returns in many areas.
This is a summary of what he and other experts believe 2023 has in store
Inflation
The RBA has not waivered in recent months with its belief that inflation will peak at around 8.0% at the end of this year, before moving back down to manageable levels across 2023 and 2024.
RBA Chief Dr Phillip Lowe has said they anticipate this, "due to the ongoing resolution of global supply side problems, recent declines in some commodity prices and slower growth in demand.”
Dr Oliver also believes inflationary pressures have peaked and are now slowing.
“Supply chain pressures have eased; demand is cooling; and labour markets are showing signs of topping out,” he said.
“In fact, it may only require a slight pull back in demand to further depress inflationary pressure significantly.
“This suggests inflation could fall faster than central banks are predicting in 2023.”
Cash rate
The most recent cash rate hike was 25 basis points and marked the eighth successive month of raises, the fastest rate of increase in 28 years.
Dr Lowe has said this is a necessary step to combat inflation, and that further rises would be dependent on economic developments.
"The board expects to increase interest rates further over the period ahead, but it is not on a preset course," he said in the monetary policy statement for December.
"It is closely monitoring the global economy, household spending and wage and price-setting behaviour."
Analysts disagree on what this implies the cash rate will move to next year.
Experts at ANZ, Westpac and CBA all expect material increases in the first half of next year.
Head of ANZ Economics David Plank believes that the cash rate will peak at 3.85%.
However, Dr Oliver believes that we are currently at or close to the peak.
"By early next year we expect that the combination of a sharp slowing in domestic demand, increasing signs that inflation has peaked and sharply weaker global growth which will in turn also drive inflation down will enable the RBA to keep rates on hold for an extended period," he said.
Property prices
The back end of 2022 saw a downturn in Australian property prices.
Inflation and the rising cash rate ate into borrowing capacities, and this decline may continue well into 2023.
AMP expect prices to be down 15-20% next year from the high point of April 2022.
If the cash rate were to increase further, the outcome is expected to be even more extreme.
"In this scenario, prices could fall by around 30%," Dr Oliver said.
Consumer confidence
The Westpac Melbourne Consumer Confidence Index was down at near recessionary lows for much of 2022.
However, the 3% rise in December suggests Australians are starting to regain their optimism, despite the tightening cycle.
ANZ senior economist Catherine Birch said this was the first of the raises this year that consumer confidence grew after.
"[This is] perhaps a sign that households expect a pause soon," Ms Birch said.
The outlook for investors
Shane Oliver believes the outlook for investors looks more positive for next year.
“Easing inflation pressures, central banks moving to get off the brakes, economic growth proving stronger than feared and improved valuations should make for better returns in 2023.” Mr Oliver said.
“Australian shares are likely to outperform again, helped by stronger economic growth than in other developed countries and ultimately stronger growth in China supporting commodity prices.”
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