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Crispin Murray: Two factors underpinning ASX company earnings

A growing population and the uneven impact of rising interest rates are two factors supporting company earnings right now. Pendal’s head of equities CRISPIN MURRAY explains

MOST people would be aware from the recent per-capita recession headlines that Australia’s population growth is outstripping economic growth.

But Australia’s rapidly growing population is also a key reason why corporate earnings are holding up, says Pendal’s head of equities Crispin Murray.

“All up, we’re probably looking at about a 3 per cent rise in the population today versus where we were a year ago,” says Murray.

Population growth has been supported by direct immigration as well as temporary visas, he says.

“That’s people coming to Australia with money in their pockets needing to spend when they arrive to set themselves up and needing to get accommodation, which is driving up rents.

“This is part of the reason that we’re seeing resilience in the top line of companies because they’re basically driven by nominal GDP, not per capita GDP.”

Population growth is also helping offset the effects of the so-called ‘mortgage cliff’ forcing households into higher, variable mortgage payments as low-rate fixed loans expire.

As Pendal’s head of bond strategies Tim Hext recently noted, we are about half-way through that step-up period – and so far most fixed-mortgage holders seem to be adjusting ok.

Watch a new webinar from our head of equities Crispin Murray

Likewise, the effects of the mortgage cliff have been muted in company reports this earnings season.

“The mortgage cliff is real – but what is offsetting it is population growth,” Murray said at his bi-annual Beyond The Numbers webinar last week.

“With each company we met over reporting season, we talked about the issues facing them and whether they were seeing the consequences of this mortgage cliff.

“But so far, the consequences are very limited.”

Uneven interest rate burden also supports earnings

The uneven impact of rising interest rates across the community is also holding up corporate earnings, points out Murray.

“Clearly, the concentration of mortgage debt is predominantly in the under-45s and particularly in the under-40s. That’s where the core pressure remains.

“As you get older, you see a big skew to savings and the people with the savings are clearly getting the benefit of higher interest rates.

“While we have seen some draw-down on savings overall, you’re actually still seeing everyone over the age of 35 adding to their savings pool.”

Data comparing spending patterns in the last three months to the last four weeks shows a distinct change in trend for under-35s – but little change for older groups.

“There is a quite complex set of trends happening in the economy, which is why I think we’ve proven to be more resilient.

“There’s a lot of focus on the pressures on people under 45, but less awareness of the spending which is happening in the older demographics.

“It’s an important thing to be aware of.”


About Crispin Murray and Pendal Focus Australian Share Fund

Crispin Murray is Pendal’s Head of Equities. He has more than 27 years of investment experience and leads one of the largest equities teams in Australia. Crispin’s Pendal Focus Australian Share Fund has beaten the benchmark in 12 years of its 16-year history (after fees), across a range of market conditions.

Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management. 

Find out more about Pendal Focus Australian Share Fund  

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This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current at September 13, 2023. PFSL is the responsible entity and issuer of units in the Pendal Focus Australian Share Fund (Fund) ARSN: 113 232 812. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting www.pendalgroup.com.

The Target Market Determination (TMD) for the Fund is available at www.pendalgroup.com/ddo. You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient’s personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date.

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