Against a backdrop of 1.6 per cent global economic growth, Credit Suisse said fixed-income assets are likely to offer “attractive opportunities for investors”, while it sees the first-half performance of equities “staying muted”.
Coming off a year marked by “persistently high inflation, aggressive central bank tightening and slowing growth”, Credit Suisse said it expects recessions in the UK and eurozone in 2023, as well as a growth recession in China.
The outlook added that these markets should have a second-half recovery — if the US manages to avoid a recession.
Similarly, Australia’s GDP growth is predicted to fall from 4 per cent in 2022 to 1.6 per cent next year, in line with the global average. The outlook also predicted that unemployment would increase to 4.5 per cent and that inflation would hit a high of 8 per cent by Christmas before falling to a run rate of 3.5 per cent by the end of 2023.
Andrew McAuley, chief investment officer at Credit Suisse Private Bank Australia, said: “Australia enters 2023 in a position of strength. Household balance sheets are robust, and unemployment is low.
“As a net exporter of energy and food, some of the drivers of global inflation aren’t having quite the same impact. That said, inflation is uncomfortably high, and the Reserve Bank will do what it takes to bring it down.”
The Reserve Bank of Australia (RBA) has increased the official cash rate from 0.1 per cent at the beginning of 2022 to 2.85 per cent as of the November rate decision, its highest level since July 2013. With the RBA committed to returning inflation to 2 to 3 per cent over time, higher rates are expected to come.
Credit Suisse expects a peak RBA rate of 3.6 per cent, probably around July or August 2023, in line with bond market futures expectations.
“The recent budget sets the stage for lower spending and higher taxes in the future. Net government debt is expected to fall from 31 per cent to 23 per cent of GDP. The improvement is due to firm iron ore and coal markets as well as more people working and paying taxes,” Credit Suisse said in its outlook.