‘Get used to it’: CommBank boss says market turmoil is here to stay

STOCK market turmoil and the low Australian dollar are here to stay. Experts warn it spells bad news for your wardrobe, holiday plans and super account.

Red wallet and Australian cash. Picture: iStock.

GET used to it: share market volatility is here to stay, and the Aussie dollar is worth a relative pittance.

With investors reeling from the worst day on the Australian share market since the global financial crisis, corporate and political leaders have warned that more turmoil lies ahead — but are quick to assure us that the world is not going to end.

“We’ve been in a really unique period in the world’s financial history, coming out of the Financial Crisis,” Commonwealth Bank chief executive Ian Narev told the ABC.

“We’ve got to get used to the fact that over the next few years there is just going to be more volatility.”

Mr Narev said computer-automated algorithmic trading had exacerbated the sell-off that wiped $59 billion off Australian markets on Monday, in the steepest decline since the depths of the GFC.

The rollercoaster ride continued this morning, with the S & P/ASX 200 Index opening down one per cent, after bargain hunters drove a $37.3 billion recovery to 5100 yesterday afternoon.

Monday’s 4.1 per cent drop saw the ASX 200 close at 5001 — the more dramatic one-day drop since January 2009 — with the Australian dollar also hitting a fresh six-year low of 72.01 US cents. It dropped again to 71.35 US cents this morning after Wall Street fell for the sixth straight session, with the Dow posting another triple-digit decline.

China’s downturn was ‘inevitable’. Picture: AFP

Mr Narev said the impact of China’s inevitable slowdown and the US interest rates hike had been on the horizon for some time, a view shared by his industry counterparts.

“To some extent there’s always been a question of: well, how is all this going to play out?” Mr Narev said.

“We’ve got to keep our eyes really clearly on the long term.”

Treasurer Joe Hockey took to the airwaves yesterday to assure Australians: “There is no crisis, this is a correction.”

Superannuation accounts have taken a hit, and self-managed super investors have been warned not to panic.

Share market investors are unlikely to flee in large numbers to the property market — as they did in previous routs — because housing markets are perceived as overheated in Sydney and Melbourne, with entry costs high and rental yields low.

Graeme Colley, the director of technical services at the SMSF Professionals’ Association of Australia, told the Australian Financial Reviewthat well-planned and diversified funds would be able to ride “over all these bumps”.

“Don’t be too rash,” Mr Colley said.

‘Everybody, stay calm.’

But other commentators have suggested no-one really knows how things will pan out, as the global economy is in uncharted territory.

Bank of England research shows global interest rates are at their lowest in 5000 years.

“We’ve never experienced a combination of events like this,” Gareth Hutchens wrote in the Sydney Morning Herald.

“None of our (economic) models demonstrate how the world works when interest rates are this low.”

Consumer group Choice advises people in the “retirement risk zone” when your super account is vulnerable to dramatic market downturns — about five years before or after retirement — to reassess their situation, even recommending they consider moving assets into a term deposit.

For those where retirement is a fair way off, chances are the corporate titans will be proven right and the market will sort itself out.

The huge losses of the GFC, which wiped $160 billion from Australian super accounts between December 2007 and June 2009, have largely been recovered as the majority of funds delivered consistently positive returns, according to rating company Chant West.

More pressing is the impact of the low Australian dollar, which continues to plummet — making the glory days of cheap overseas holidays a distant memory.

The more volatile market has led to predictions the Aussie dollar will hit 70 US cents by the end of the year, and 68 US cents by March next year.

Just a few years ago, Aussies were living it up in jetsetting style, holidaying around the world and bringing home suitcases filled with gloriously cheap clothes, electronic and other goods and our currency hit an all-time 2011 high of US $1.10.

This morning, it was trading at a dismal 71.35 US cents, about six cents below the 22-year average.

It’s not just holidays that will be curtailed; the costs of imported cars, clothing, whitegoods and electronics will also increase.

However, that lower dollar value could give Australia’s manufacturing industry a much-needed boost resulting in possible jobs growth.

With global oil prices falling, there should also be relief at the petrol bowser.

Commsec’s chief economist Craig James told the Herald Sunpetrol prices could fall as low as $1.10 or $1.15, “putting extra spending power back in pockets”.