News Updates
AS IT HAPPENS
The Government's Mid-Year Economic & Fiscal Outlook (MYEFO), announced yesterday by Joe Hockey, included, among other things, changes and clarification on 92 tax and superannuation measures that were announced, but not legislated, by the previous Labor Government. Of the 92 measures, 34 will proceed, 3 will be amended and 55 will be scrapped. Read the changes here Rick Maggi (Westmount. Financial Solutions.)
It's that time of year again where we can take a look at the year that was, and then look forward to the next twelve months. Read more here Rick Maggi (Westmount. Financial Solutions.)
and don't forget to buckle-up… click here
As widely expected, the Reserve Bank of Australia decided this afternoon to keep interest rates at the historic low of 2.5 per cent.
In a statement released today, RBA Governor Glenn Stevens says uncertainty remains about the strength of economic growth outside of Australia's mining sector. "There has been an improvement in indicators of household and business sentiment recently, but it is still unclear how persistent this will be," he said. The RBA is also concerned about the economic impact of the persistently high value of the Australian dollar.
While improving economic data has prompted some economists to predict the RBA will raise rates late next year, the general consensus is that interest rates will remain low for some time and this has several implications for investors…
1) Continued low returns from cash and term deposits will attract investors to other assets with better cash flows, such as corporate debt, real estate investment trusts, various shares and unlisted non-residential property.
2) Government bonds will continue to generate very low returns.
3) Generally easy global and Australian monetary conditions through next year will help underpin further good gains in growth assets like shares.
The RBA will make its next interest rate decision in February, but don't hold your breath! Rick Maggi (Westmount. Financial Solutions.)
AMP Capital's Dr Shane Oliver looks discusses the potential consequences of a deflationary spiral versus rising inflation on your hip-pocket. Enjoy. Read more here Rick Maggi (Westmount. Financial Solutions.)
A quick and interesting article on Perth's growth prospects. Enjoy. Read more here Rick Maggi (Westmount. Financial Solutions.)
If you're not sure if you need or want financial advice, perhaps thinking about doing it all yourself? Read on...
Read 7 Good Reasons Read Robert Kiyosaki's Blog
Rick Maggi (Westmount. Financial Solutions.)
An effective 'salary sacrifice' strategy now could be the key to getting more from your super in the future. Read more here Rick Maggi (Westmount. Financial Solutions.)
China's growth cycle is stabilising and that's good news for Australia's economy, our markets, and possibly your super fund. AMP Capital's Dr Shane Oliver weighs in on recent fears over slowing Chinese growth with a typically calm, well balanced commentary. As always, his article is easy to read and not overly technical. Enjoy! Read more here Rick Maggi (Westmount. Financial Solutions.)
The strong growth in the prices of many Australian shares over the past year is attributable, in part, to the buying of yield-hunting investors. A number of high-yielding financial stocks, for instance, are trading at or near to record highs.
Predictably, in the prevailing low-interest environment, many investors are now turning to more concentrated portfolios of high-yielding shares in an effort to maintain their investment yields and their lifestyles. But, unfortunately, this pursuit of yields comes at the cost of undertaking a higher level of risk for an investor's overall investment portfolio.
Rather than exposing portfolios to higher risk and upsetting carefully diversified portfolios in a hunt for income, investors should focus more on a portfolio's total return – that is the combination of its income and capital growth. With this approach, investors in need of more income than produced by a portfolio draw an amount taken from their portfolio's total return, taking into account cash-flow and capital appreciation.
In this way, investors can remain on track to achieving their long-time goals without upsetting their portfolio's diversification and without taking greater risks. Rick Maggi (Westmount. Financial Solutions.)
The Chinese philosopher Confucius once said that life is very simple, but we insist on making it complicated. You could say the same thing about investment… Read more here Rick Maggi (Westmount. Financial Solutions.)
As widely expected, the Reserve Bank of Australia decided to keep interest rates on hold this afternoon.
From an investment perspective, 6-12 month Term Deposit rates will remain around the 3.7% mark, no doubt encouraging more investors into higher-yielding, higher-risk assets such as shares and property.
While we remain very optimistic about 2014, particularly share markets, investors should avoid tinkering too much with the 'balance' of their superannuation, pension or investment portfolios, in the search for better yields in a low-interest environment. Rather than exposing portfolios to higher risk and upsetting carefully diversified portfolios in the hunt for income, investors should focus more on their portfolio's totalreturn - that is the combination of its income and capital growth.
Again, were excited about the prospects going forward, but taking a more 'holistic' view about investment returns will keep investors on track to achieving their long-term goals without taking unnecessary risks.
By the way, this is an opportune time for borrowers to take a closer look at their finance arrangements, so feel free to call us if you need an impartial second opinion. Rick Maggi (Westmount. Financial Solutions.)
Retail sales growth has been poor for four years now reflecting a combination of consumer caution, falling wealth, “excessive” interest rates, the strongly rising $A, surging electricity prices, slowing income growth and job insecurity. With some of these factors now fading or set to fade, retail sales growth is likely to pick-up a notch next year.
This should see growth pick up to around 4 to 5% pa from 2-3% over the past four years. Read more here Rick Maggi (Westmount. Financial Solutions.)
The corporate regulator has issued a warning about SMSF spruikers who are encouraging consumers to invest in residential property via the National Rental Affordability Scheme (NRAS).
“ASIC is aware that a number of SMSF promoters include misleading statements in their ads about the grants that may be available under NRAS,” said the regulator.
The NRAS offers property investors direct payments and tax offsets for building and leasing to moderate income earners at a rate that is 20 per cent below market value.
“ASIC has seen ads stating that consumers can use their superannuation to purchase a property using the scheme and receive ‘$100,000 tax free’,” said the statement.
The regulator said the advertisements do not provide balanced messages about the “features, benefits and risks” of investing in an NRAS property via an SMSF.
The advertisements fail to mention that the eligibility to participate in the scheme is subject to restrictions; there are fees associated with purchasing, tenanting and managing NRAS properties; to receive a total financial incentive of $100,000 consumers need to remain in the scheme for 10 years; consumers will be required to rent out the property at 20 per cent below market value to eligible tenants, said the Australian Securities and Investments Commission (ASIC).
The regulator noted that if consumers purchase an NRAS property through an ‘approved participant’ there is no requirement for the incentives to be passed on.
In addition, any contractual arrangements should be checked to ensure the relevant NRAS-approved participant will comply with all legislative requirements, said ASIC.
ASIC commissioner Greg Tanzer said consumers need to be cautious when approached with an offer that appears too good to be true.
“ASIC is focused on protecting consumers and where we see people recommending consumers invest using their SMSF, we want to ensure they are providing balanced messages that comply with the law,” he said.
“It is important that ads are clear, accurate and balanced, especially when consumers are looking for investments for their long-term retirement,” said Mr Tanzer. Rick Maggi (Westmount. Financial Solutions.)
How often do you check whether your retirement savings are on track to finance your planned standard of living in retirement? Such check-ups are a crucial part of sound financial planning.
One of the most common times for a retirement-savings check-up would be when individuals enter the final decade or so before their intended retirement date.
Such a check-up may encourage you to really concentrate on maximising your super in the countdown to retirement and possibly to reconsider your target retirement date.
Ideally, of course, retirement-savings check-ups should be undertaken throughout a person's working life to see if the savings are growing adequately.
Ross Clare, research director of the Association of Superannuation Funds of Australia (ASFA), writes in the October issue of the association's magazine Superfunds that individuals and Government policymakers "perennially" ask the question whether retirement savings are on track.
In his cover story - headed Is super on track? - Clare writes that individuals are interested about whether they can afford their wanted retirement lifestyles. And policymakers want to know whether Australia's retirement savings will be adequate and whether some pressures will be taken off the age pension.
Clare notes that superannuation coverage and the amount of super savings have significantly increased since the introduction of the superannuation guarantee scheme in 21 years ago.
However, his article clearly shows that the latest super balances at the age of likely retirement are still markedly below the amount needed to finance what ASFA regards as a "comfortable" standard of living in retirement. This remains the position when the age pension is taken into account.
The latest ASFA Retirement Standard report estimates that a "comfortable" standard of living would cost a single person $41,197 a year or a couple, $56,406. (The issue of what constitutes a "comfortable" living standard is debatable.)
A table prepared by the Australian Bureau of Statistics for ASFA lists the average financial assets of employees aged 60-64 years of age in 2011-12 as: cash, $19,858; shares, $10,663; and superannuation, $183,254.
Are your retirement savings on track to meet your retirement goals?
Robin Bowerman, Vanguard Australia. Rick Maggi (Westmount. Financial Solutions.)
With US Republicans and Democrats going head to head over budget and debt negotiations, the rest of the world looks on powerless and bemused. Beyond some of the media hysteria, in this article AMP Capital's Shane Oliver provides a balanced, sober look at the debt ceiling standoff and the likely outcome. Read more here Rick Maggi (Westmount. Financial Solutions.)
Earlier today, the US Congress agreed to end the partial government shutdown and raise the debt ceiling. Some positives...
1. While the run up to the 11th hour decision indicated that brinkmanship is alive and well in the US, the clear message is that at the end of the day the majority of US politicians will not let the US default on its debt servicing or broader spending commitments. As Winston Churchill once said "you can always rely on the American's to do the right thing - after they've tried everything else".
2. While the brinkmanship seen in the US on a semi-regular basis is not good for confidence, it is not all bad as it has let to a more balanced solution to US budget and debt problems than would have been the case if either side of politics had complete control.
3. The legislation for the temporary fix appears to include a rule that would allow the President to increase the debt ceiling unless Congress voted against it with a tow thirds majority in each chamber. Such an approach could allow the Republicans to vote against a debt ceiling increase in February but not stop it.
4. Finally, having been so badly burned over the last few weeks, Republicans may not be so willing to set off another Government shutdown and/or debt ceiling crisis early next year. Americans appear to have largely blamed them for the latest crisis and their favourable rating dropped to the lowest level in 20 years. With the mid-term Congressional elections coming up next year, they may not be prepared to risk a re-run or worse as it could mean they will lose control of the US House of Representatives. So another extreme showdown may end up being avoided next year.
With the worry list continuing to diminish, many believe that shares are likely to rally into year end with further gains next year, with some predicting that Australian shares could hit the 5500 mark by year end and 6000 by 30 June next year. While this may seem overly optimistic, an ASX at 6000 would still be about 13% below its all time high from 7 years earlier. Rick Maggi (Westmount. Financial Solutions.)
A suburb-by-suburb analysis of the residential property market, accurate to September 30th 2013. Enjoy. Rick Maggi (Westmount. Financial Solutions.)
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