A note from Jack

April has been a difficult month for markets. The ASX 200 has fallen in seven of its last eight sessions, weighed down by sticky inflation, ongoing disruptions in the Middle East, and a sharp jump in fuel prices that has put the RBA in an uncomfortable position ahead of its May meeting. The March CPI data, released on 29 April, confirmed annual inflation has risen to 4.6 per cent, the highest reading since September 2023, driven largely by a record monthly surge in fuel costs. That result has materially changed the conversation around what the RBA does next.

This newsletter is our attempt to cut through the clutter. We have put together a plain-English summary of what has happened across markets, interest rates, the Australian economy, and superannuation over the past month. We have tried to explain not just what has changed, but what those changes mean in practical terms for everyday Australians.

As always, this newsletter is general information only. If anything here raises questions about your own situation, we are happy to talk it through.

Jack Manoni  •  Koombana Financial

The ASX has now fallen in seven of its last eight sessions

After a strong recovery in early April, the Australian share market has given back most of those gains. The ASX 200 closed at around 8,616 points on 30 April, down roughly 0.8% on the day and logging its seventh decline in eight sessions. The index is now sitting at a three-week low, having pulled back from highs near 9,000 earlier in the month. That earlier recovery was driven by relief around a perceived easing in Middle East tensions, but with the Strait of Hormuz still effectively closed and US-Iran negotiations stalling, sentiment has shifted again.

To understand why markets have turned lower, it helps to understand how share markets react to uncertainty. In early April, investors had largely priced in a ceasefire scenario and moved quickly back into the market. As it became clear that the situation was not resolving as hoped, and that oil prices were staying elevated, that optimism faded. The March inflation data released on 29 April, showing annual CPI of 4.6%, added to the pressure by reinforcing expectations that interest rates will stay higher for longer.

Global share markets have experienced a similar pattern. US indices have been mixed, with the Dow, S&P 500 and Nasdaq all facing headwinds from persistent inflation and uncertainty about the Federal Reserve’s next steps. Asian and European markets have followed a similarly cautious tone. These things tend to move together during sustained geopolitical events.

Gold has been another standout story this year. The gold price is currently around US$4,550 to US$4,600 per ounce, having pulled back from a record high of around US$5,405 in January but still up roughly 38% over the past twelve months. Gold tends to rise when people are uncertain about the future, because it is seen as a stable store of value when other assets feel risky. Recently, however, rising interest rate expectations have provided some headwind, given that gold does not generate income and becomes relatively less attractive when rates are high.

Closer to home, Australia’s energy sector has held up relatively well given the elevated oil price environment. But the broader index has been weighed down by healthcare, consumer staples, and the major banks, with three of the four big banks declining between 1% and 1.4% on some sessions. Resources stocks have been mixed, with gold and critical minerals names faring better than traditional iron ore plays.

Why the uncertainty is not over, and what it means from here

The Middle East situation has not improved as markets had hoped. The Strait of Hormuz remains closed or heavily disrupted, and US-Iran negotiations stalled in late April after the United States rejected Iran’s latest proposal. That matters significantly for global energy markets. Around one fifth of all global oil and gas supplies pass through the Strait, and those disruptions have now been running for several weeks. Oil prices remain elevated, with Brent crude above US$110 per barrel and West Texas Intermediate approaching US$100.

The broader economic effect of sustained high oil prices is worth understanding. The first and most visible impact is on petrol and energy bills, which have risen sharply. The March CPI data confirmed this, with automotive fuel rising 32.8% in the month alone, the largest single monthly increase since the ABS series began in 2017. That is a meaningful hit to household budgets. The deeper and slower-moving effect is on business activity, transport costs, and supply chains, which tend to build over the months that follow an energy shock rather than showing up all at once.

There are real reasons for caution, but also for perspective. Australia’s position as a net energy exporter means we are better placed than most. When oil prices rise, our export revenues tend to rise with them, which provides some economic cushion that is not available to countries like Japan or Germany. The RBA Deputy Governor Andrew Hauser acknowledged this week the risk of a “nightmare scenario” where inflation accelerates at the same time as growth weakens, but also noted the uncertainty around how long the disruption will last.

For investors, it is worth separating what has happened from what it means for the longer term. A month of volatile markets, driven by an energy shock and two consecutive interest rate rises, is genuinely uncomfortable. But the structural supports for Australian shares, including solid corporate earnings, a resilient jobs market, and ongoing commodity demand from Asia, have not fundamentally changed.

Where rates are now, and what comes next

The Reserve Bank of Australia (RBA) raised the official cash rate by 0.25% at its March 2026 meeting, taking it to 4.10%. The decision was close, with board members voting five to four in favour of the increase. There was no April meeting. The RBA moved to eight scheduled meetings per year in 2024, and the next decision is on 5 May.

To understand why the RBA keeps raising rates, it helps to understand what they are trying to do. The RBA’s primary job is to keep inflation under control, ideally within a target band of 2% to 3%. When inflation runs above that band, the RBA typically raises interest rates. Higher rates make borrowing more expensive, which encourages people to spend less and save more, which in turn reduces the demand that pushes prices up. It is a blunt but effective tool, and it takes time to work through the economy.

The problem right now is that inflation has not come down as quickly as the RBA expected. The March CPI data, released on 29 April, showed annual inflation at 4.6%, up from 3.7% in February and the highest reading since September 2023. The sharp jump was driven almost entirely by a record monthly surge in fuel costs, with automotive fuel rising 32.8% in March alone as oil prices spiked following the Strait of Hormuz disruptions. The RBA’s preferred underlying measure, the trimmed mean, held at 3.3% annually, which is still above target but showed no further acceleration.

The May 5 meeting is now the most closely watched of the year. Before the March CPI release, markets were pricing in around a 62% probability of another rate increase. That probability has shifted following the data, though the fact that the trimmed mean held steady has tempered some of the more aggressive forecasts. A further increase to 4.35% is possible, particularly if the board judges that the fuel price surge risks embedding into broader inflation expectations. A pause to assess the impact of the two prior hikes is also plausible.

The major banks remain divided. Commonwealth Bank had signalled another rise is likely. ANZ has continued to argue the current level of rates may already be sufficient. The RBA itself has flagged the risk of what its Deputy Governor described as a “nightmare scenario”, where inflation accelerates even as growth weakens. That is a genuinely difficult position for any central bank, and the May decision will reflect just how uncertain the outlook has become.

Inflation has jumped, and it is fuel driving the number

It is worth understanding what the 4.6% figure actually tells us and what it does not. The headline CPI captures everything including the fuel spike, but the RBA’s preferred underlying measure, the trimmed mean, came in at 3.3% annually, unchanged from February. That is still above the 2-3% target, but the fact it did not accelerate further is some relief. It suggests this is partly an energy shock rather than a broad-based surge across all categories of spending. That distinction matters for how the RBA interprets the data.

From 1 April, the Federal Government cut the fuel excise by half for a period of three months, which should take some of the sting out of fuel prices in the April numbers. That will not undo the March spike but it does mean the April CPI read should come in lower on fuel alone. Housing costs remain elevated, rising 6.5% annually, with electricity still running 25.4% higher year-on-year following the expiry of government rebates. Services inflation, the stickier component that the RBA watches closely, actually eased to 3.6% from 3.9%, which is a modestly encouraging sign.

The labour market continues to hold up well, which is both good and complicating news for the RBA. A strong jobs market means most people who want work can find it, providing some financial resilience for households. But it also means wage pressures have not fully abated, and capacity in the economy remains tight. Business lending is growing at around 9.5% per year, which suggests businesses are still investing rather than pulling back. And property prices nationally rose around 1.6% in the month of March, with Perth continuing to be one of the country’s strongest markets. That combination of a firm jobs market, growing business lending, and rising property prices is part of why the RBA has felt the need to keep raising rates despite the discomfort it causes.

Australia’s trade position remains solid. The goods trade surplus reached $5.7 billion in February, up from $2.3 billion the month before. As a major exporter of iron ore, coal, gas and agricultural commodities, Australia benefits when global commodity prices are elevated. That income flows into government revenues and corporate earnings, which provides a broader economic cushion even as households feel the pressure of higher costs.

New tax on large super balances

One of the most significant superannuation changes in years passed through Parliament in March 2026 and will take effect from 1 July 2026. It is known as Division 296, and in plain terms it introduces an additional 15% tax on the earnings within a superannuation account where the total balance exceeds $3 million.

To understand what this means, it helps to first understand how super is normally taxed. Earnings inside superannuation, things like investment returns, interest and dividends, are generally taxed at a concessional rate of 15%. That lower tax rate is one of the core benefits of saving through superannuation. Division 296 adds a further 15% tax on top of that, but only on the earnings that relate to the portion of the balance above $3 million. So the effective tax rate on those earnings rises from 15% to 30%.

If your total superannuation balance is below $3 million, Division 296 does not affect you at all. Nothing changes. For those with balances above the threshold, the additional tax only applies to the earnings on the amount above $3 million, not to the entire balance and not to the capital itself. The regulations around how earnings will be calculated are still being finalised, particularly for self-managed super funds (SMSFs) and defined benefit interests, which are more complex to assess. Anyone who thinks they may be affected should speak with their financial adviser or tax professional once the final rules are confirmed.

Contribution limits are increasing from 1 July

Superannuation contribution caps are the limits set by the government on how much you can add to your super each year while still receiving favourable tax treatment. These caps are indexed to wages over time, and from 1 July 2026 they are going up.

The concessional contribution cap, which covers before-tax contributions such as employer contributions and salary sacrifice, rises from $30,000 to $32,500 per year. Concessional contributions are taxed at 15% inside super, which for most people is lower than their personal income tax rate, making them a tax-effective way to build retirement savings.

The non-concessional contribution cap, which covers after-tax contributions made from personal savings, rises from $120,000 to $130,000 per year. These contributions are made with money on which you have already paid income tax, so they are not taxed again when they enter super.

There is also a bring-forward rule, which allows eligible people to make up to three years’ worth of non-concessional contributions in a single year, rather than spreading them out. The three-year bring-forward cap increases from $360,000 to $390,000. The total superannuation balance thresholds that determine eligibility for this rule are also shifting upward, which may open the option to people who were previously just above the cut-off.

It is also worth being aware of the carry-forward rule for concessional contributions. If you have not used your full concessional cap in previous years and your super balance is below $500,000, you may be able to carry forward unused amounts from up to five prior years and make a larger concessional contribution in a single year. This can be a useful option for people who had career breaks, worked part-time, or had lower incomes in earlier years. The way this appears in MyGov can sometimes be confusing or show no figure at all, but that does not necessarily mean the entitlement is not there.

Deeming rates have increased by 0.5%

From 20 March 2026, Centrelink deeming rates increased by 0.5%. If you receive the Age Pension or another income support payment, it is worth understanding what deeming rates are and how this change could affect you.

Deeming rates are the rates that Centrelink uses to estimate how much income your financial assets are assumed to be generating. The word “deemed” is important here. Centrelink does not look at what your investments actually earned. Instead, it applies a standard rate to the value of your financial assets and assumes that is your income from those assets, regardless of what they actually returned. This assumed income is then used in the income test, which alongside the assets test determines how much Age Pension you are entitled to receive.

There are two deeming rates, a lower rate and an upper rate. The lower rate applies to financial assets up to a certain threshold, and the upper rate applies to amounts above that threshold. From 20 March 2026, the lower rate is 1.25% and the upper rate is 3.25%, each up by 0.5% from the previous levels. The thresholds themselves have not changed: the lower rate applies to the first $62,600 in financial assets for singles, and the first $103,800 for couples.

The Government has also introduced a more structured review process for deeming rates going forward. The Australian Government Actuary will now formally review the rates every six months and provide recommendations to the Minister. Previously, the rates were adjusted at the Minister’s discretion and in some cases went years without being updated. A regular, independent review process should make the rates more responsive to actual conditions in savings and investment markets.

For those whose pension entitlement is calculated under the income test, this increase in deeming rates may result in a modest reduction in payments. The actual impact depends on the size and composition of financial assets. Anyone concerned about the effect on their Centrelink entitlements should speak with their financial adviser or contact Services Australia directly.

Transferring overseas retirement savings to Australia

For clients who have lived or worked abroad, whether in the United Kingdom, the United States, Canada, New Zealand or elsewhere, there is often a question about what to do with retirement savings accumulated in another country. This is an area where the rules are genuinely complex and the tax consequences can vary significantly depending on where the money is coming from and when the transfer happens.

The first thing to understand is whether the overseas fund qualifies as a “foreign superannuation fund” under Australian law. This is a specific legal definition, and not all overseas retirement accounts meet it. A UK pension scheme will generally qualify. A US 401(k) retirement plan and a Canadian RRSP typically do not, and the tax treatment for funds that fall outside the definition is generally less favourable.

For qualifying funds, the Australian tax treatment depends largely on timing. As a general rule, only the growth earned on the fund after you became an Australian tax resident is taxable in Australia. The original contributions and any growth accumulated before you arrived are typically treated differently. The timing of any transfer also matters. Transfers made within six months of becoming an Australian tax resident are often treated more favourably than those made later, though the specific rules vary.

UK pension transfers carry an additional layer of complexity due to the UK’s own rules around pension transfers to overseas schemes, including a set of tests that must be passed to avoid UK tax penalties. Anyone with a UK pension who is considering a transfer should ensure they understand both the Australian and UK implications before doing anything.

This is one of those areas where the interaction between different countries’ tax systems can produce unexpected results. The general information above is intended to give a sense of the issues involved. Anyone in this situation should obtain specific professional advice before making any decisions, as the rules are highly sensitive to individual circumstances.

This has been a particularly data-heavy month. CPI data, RBA commentary, Middle East developments, market swings, and superannuation changes all landing at once is a lot to absorb. Our job is to help you make sense of what actually matters for your position and filter out what does not. If anything covered in this newsletter has raised a question specific to your situation, we are happy to talk it through. We are based in Bunbury and Joondalup and are always available for a conversation.

This newsletter is general information only and does not constitute personal financial advice.