Homeowners are already finding it tougher with an increase to the cost of living, with everyday items such as lettuce, fuel and other groceries increasing.

A panel of experts, including Saul Eslake, expects inflation to reach almost 7 per cent to June, which is the highest since the 1990s.

So what should the average Australian investor do?

Several financial experts spoke to Canstar and gave their advice on where to invest when inflation is high.

Chris Batchelor: “Companies that do well in higher inflation environments are commodity businesses – both hard and soft – and supermarkets and value retailers. Consumers become more cost-conscious leading to an advantage for value-based offerings over their premium peers.

Hard commodities include iron ore and copper and Fat Prophets CEO Angus Geddes said to the Australian Financial Review: “The resource sector will continue to outperform and lead the Australian sharemarket higher.”

Soft commodities include corn and the Betashares Global Agriculture Companies ETF (ASX:FOOD) jumped 53 per cent in the year to May 31 and invests in the world’s largest agriculture companies.

“One business that is well-positioned for a high inflation environment is Westfarmers. Its retail chains Bunnings and Kmart are value offerings so they will be attractive to cost-conscious customers.”

Chris Brycki suggested gold: “Gold has proven to be an asset class that preserves its value and acts as a hedge against inflation. When inflation rises, the value of paper money declines (also known as currency debasement), and commodities such as gold help protect against this because they have a limited supply.”

If you don’t want to invest in shares because of market volatility there are other investment options you could consider.

The Australian Financial Review suggests cash. The publication says that cash is most valuable when it’s in limited supply and as equity markets improve, holding cash could prove to be valuable.

The Australian dollar may increase against the US dollar provided supply chains remain impacted by the Coronavirus pandemic.

Infrastructure is another safe option for investors.

ClearBridge Investments published a report last month that says: “Infrastructure assets can generate the same returns and growth regardless of their ownership structure, listed and unlisted entities differ in terms of sustainability, capital structure, performance, liquidity and exposure to structural trends.

“Over the past two decades, investing in both listed and private market infrastructure strategies has become mainstream.”

The report goes on to say that infrastructure is typically more protected from inflation than other asset classes. It is however sensitive to interest rates.

Similar to infrastructure, real estate has been a safe investment since the GFC in 2008, however, it is sensitive to interest rate hikes and The Conversation’s 2022-23 forecasting survey predicts Sydney and Melbourne house prices to drop by 6-7 per cent.

Any suggestions in this article are general in nature only and before investing, you should consider whether the investment is right for you and if you have one, talk to your financial advisor or planner.

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