Australian Asset Review —Enrichment Success PTY LTD

Market Review

How Australian asset classes have moved over the last 20 years

A descriptive look at historical ranges. No forecasts.

When clients ask us "what is a normal return?" we usually push back on the question. There is no single normal —the answer depends on which 20-year window you pick, which asset mix, and whether you adjust for inflation. What we can do is describe the range.

Australian equities

Over rolling 20-year windows, the All Ordinaries has delivered long-run nominal returns in the high single digits to low double digits, with real returns after inflation materially lower. Along the way, there have been drawdowns of 40 to 50 per cent —the early 2000s, the GFC, the 2020 COVID shock. Anyone building a plan that assumes no drawdown is planning against history, not with it.

Cash and fixed interest

Cash returns have tracked the cash rate, which over the last 30 years has moved from double digits in the early 1990s to near zero in the 2010s, back to 4 per cent plus in 2023-24. The 2010s were an anomaly; the longer average is higher. Income-focused clients who remember 1990s deposit rates are planning off a different world.

Residential property

Australian residential property has had very long upswings and shorter corrections. The 2010s saw substantial price growth in Sydney and Melbourne, followed by a 2017-19 correction and the 2020-21 upcycle. The data shows clearly that property is not a one-way bet, even in Australia.

Property and equities have different long-run patterns

The point

Every asset class has had a period where it looked unstoppable, and a period where it looked broken. The planning conversation is not about picking the next unstoppable one. It is about building a mix that survives the broken periods without forcing a sale.

Sources: RBA, ABS, ASX historical data. This note is descriptive and does not constitute investment advice.

Currency

The Australian dollar: what moves it and why it matters

A descriptive look at AUD drivers and portfolio implications.

The Australian dollar is a freely floating commodity currency. Its value against the US dollar and other major currencies moves with commodity prices, interest rate differentials, global risk sentiment and China's economic cycle. Understanding these drivers helps frame why cross-border portfolios gain and lose purchasing power when the AUD moves.

Commodity prices

Australia is a net exporter of iron ore, coal, liquefied natural gas and agricultural commodities. When commodity prices rise, global demand for AUD rises (to pay Australian exporters), and the AUD tends to strengthen. The reverse holds when commodity prices fall. This is why the AUD is sometimes called a "commodity currency" alongside the Canadian dollar and Norwegian krone.

Interest rate differentials

When the Reserve Bank of Australia raises rates relative to the US Federal Reserve or other major central banks, global capital flows into AUD-denominated assets to capture the higher yield. This tends to strengthen the AUD. When Australian rates fall relative to other countries, the reverse happens. The 2010s, with Australian rates higher than US rates for most of the decade, saw a relatively firm AUD.

Imports and exports

A weaker AUD makes Australian exports cheaper for foreign buyers (supporting export sectors like tourism, education and mining) but makes imports more expensive (including imported electronics, cars and machinery). A stronger AUD does the opposite. This transmission affects Australian businesses across most sectors, not just those directly trading overseas.

Cross-border portfolios

An Australian investor holding US shares or cash gains when the AUD falls (because each USD translates into more AUD) and loses when the AUD rises. This currency effect can overwhelm the underlying asset return in a given year. For long-term holders, currency movements tend to partially average out, but the path can be volatile.

The planning point

Currency exposure is a deliberate choice, not an accident. Australian investors who hold overseas assets have implicit or explicit currency exposure. Whether to hedge that exposure, and to what extent, depends on the investor's time horizon, income currency and tolerance for path volatility. This is a structural planning question, not a short-term trade.

Sources: RBA, ABS, BIS. This note is descriptive and does not constitute investment advice.

Australian Major Asset Market Review