ABH Financial Services Blog

Preparation is the best defence

2012-01-31T14:00:00+00:00

“You have cancer” are words that you never want to hear but when you do, you can be faced with questions like: Why me? What will happen to my family? How do I fight this? How much will it cost? How will my family cope financially if I can’t work or, worse yet, if I don’t survive?

According to the Cancer Council of Australia, cancer is the second leading cause of death with approximately 43,000 people estimated to have died from the disease in Australia in 2010 and about 114,000 new cases diagnosed during the year.

Being told that you have cancer is a big enough blow to your mind, body, emotions and overall spirit without having to worry about your finances. As a person living with cancer, your first priority is to get well again and spend as much time with your loved ones as possible. However, it can be hard to concentrate on these priorities when you have bills to pay, a family to feed and mounting medical costs.

Many people believe that taking out life insurance is for the aged, those who are ill, have children or are thinking about retiring. This is a myth.

An illness like cancer can strike when you least expect it and one of the most responsible actions you can take is to be financially prepared. Similar to private health insurance, taking out life insurance when you are young and healthy ensures lower premiums for the lifetime of your policy.

So what life insurance policies should you be considering?

Trauma Cover

Trauma Cover provides a lump sum payment if you’re diagnosed with a specified trauma condition. Trauma Cover is designed to help pay for your medical costs and living expenses, providing you with some financial security during the important recovery process.

The types of conditions that Trauma Cover may cover you for include: heart attack, multiple sclerosis, motor neurone disease, major organ transplant, severe burns, cancers, dementia and stroke or paralysis.

Income Protection

Income Protection, also known as salary continuance, usually pays a monthly benefit of up to 75 per cent of your regular income if you’re too sick or injured to work.

This type of insurance is designed to help you continue to pay the mortgage, children’s school fees, utility bills and buy food, clothes and other day-to-day expenses.

Total and Permanent Disablement (TPD)

TPD cover provides a lump sum payment if you’re totally and permanently disabled. This cover will usually help you pay for medical expenses, repay major debts and ensure that you are looked after in the future.

Death Cover

Death cover works by making a lump sum payment to your family if you were to die, or, under some policies, are diagnosed with a terminal illness. It offers you the security that if the unexpected were to happen, your family would have financial protection.

For anyone who has large debts such as a mortgage, it is important to take out death cover, irrespective of your age.

Making sure you have the right cover will help give you peace of mind now and financial support in the unfortunate incident that you experience disability, illness or death.

If you would like professional advice about which life insurance option is most suitable for you and your family, you could consider consulting with an accredited financial planner. Your financial planner will investigate how much cover you currently have and how much you should have by taking into consideration your personal circumstances and needs.

Get in touch with our office for a complimentary review today..

Adrian Bernard is an Authorised Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS Licence No. 232706.

Any advice given is general only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situation and needs.

Back to school planning tips 2012

2012-01-31T14:00:00+00:00

Back to school planning tips 2012

As children head back
to school after the summer holidays many parents across Australia can breathe a
sigh of relief. However it’s not always
as simple as shuffling them out the front door and waving goodbye.
Parents might feel like they are just recovering from the cost of Christmas, so
the expenses involved with the return to school can seem overwhelming.

However some simple planning can help to reduce the cost pressures of sending
the kids back to school.

School fees
After a mortgage, education costs can be one of the family’s biggest expenses,
so it pays to plan carefully. Some
families choose to use a dedicated education savings plan, managed fund or a
high-interest savings account to prepare for the costs of school and/or
tertiary education.

By making regular deposits into the savings tool of your choice, it can help spread
the cost of education and also earn some interest.

When it comes to private education, there are often discounts for paying school
fees in full rather than in instalments. If manageable, this could save parents a
considerable amount. Alternatively, many
schools have a direct debit system where fees are paid regularly and can easily
be managed as part if the family budget.

Take advantage of any family and childcare benefits available to you, such as
the Education Tax Refund (www.educationtaxrefund.gov.au) if eligible. This benefit offers up to 50 per cent back on
a range of children’s education expenses, now including uniforms.

Education expenses
When budgeting for education costs for the year, it can help to make a list of
all the expected expenses. While fees,
uniforms, shoes and stationery are the obvious ones, don’t forget school camps
and excursions, music lessons, fees for sporting activities and different sport
uniforms, internet access and computers.

Keep a list of all major events and expenses during the year so you can set
aside money and won’t be hit with unexpected last-minute bills.

The cost of text books and stationery can be reduced if you shop around. Many text books are available new or
second-hand at reduced prices from online sellers. While many schools also have sales at the end
of each year for students to buy and sell used books.
Children can re-use any of last year’s items from the stationery list if they
are still in good condition, such as scissors, pencil cases, flash drives and
calculators.
For items you need to buy, try discount stores. Most chain stores have school stationery sales
in January where you can also pick up cheap school bags, lunch boxes and other
necessities.
Remember to name all the children’s items to reduce the risk of them being lost
and having to be replaced.

Lunches
There are many small daily cost reductions to consider that add up to
significant savings over the year. An
obvious money saver is sending a packed lunch to school instead of giving the
kids lunch money. While it can be easy
for busy parents to give their children money for the canteen, setting aside a
small amount of time to prepare a healthy and filling lunch will end up costing
far less over the year.

Pocket money
The start of a new school year is often the time when families review pocket
money. How much a parent gives can
depends on the age of the child, what they are expected to do to earn it, and
how much disposable income you want them to have access to.

Many teenagers are “paid” for doing household chores such as mowing lawns or
washing the car. This money can be paid
directly into a low-fee savings account so the children are encouraged to save.

While you need to factor pocket money in when managing your household budget,
the financial lessons children can learn ensure it can be a valuable exercise
for everyone Involved.

By following these tips you can ensure you don’t break the bank when the kids
go back to school. You could even go to
the head of the class in terms of future planning.

Adrian Bernard is an Authorised
Representative of AMP Financial Planning Pty Ltd, ABN 89 051 208 327, AFS
Licence No. 232706.

Any advice given is general only and has not taken into account your objectives,
financial situation or needs. Because of
this, before acting on any advice, you should consult a financial planner to
consider how appropriate the advice is to your objectives, financial situation and
needs.

Oliver's Insights - Jan 2012 - The global economy looking a little less scary

2012-01-31T14:00:00+00:00

Oliver's Insights

The global economy looking a little less scary

25 January 2012

The last month or so has actually seen better news regarding the global economy - European Central Bank action appears to have reduced the risk of a banking crisis in Europe, US economic data has continued to surprise on the upside and Chinese economic data remains consistent with a soft landing.
Downwards revisions to World Bank and International Monetary Fund forecasts and associated risks are just catching up to the market concerns of three or four months ago.
While shares are at risk of a short-term correction and Europe remains a source of volatility, the improved global economic backdrop is a positive sign for shares and related growth trades going forward.

see the full report here http://www.ampcapital.com.au/K2DOCS/site_ampci/37A8C0C3-A5C9-4084-B028-48056316EB2C/2012-Jan-25-Olivers-Insights-The-global-economy-looking-a-little-less-scary.pdf?DIRECT

Concereed about the markets? Take a look at the bigger picture

2011-08-16T14:00:00+00:00

The recent volatility in global and Australian financial markets is affecting Australian investors. Understanding the markets, the causes of the uncertainty and how it impacts you will help you to make confident decisions about your financial future.

AMP have featured a range of information on the site link below to help you navigate through the current volatility, and will update this page as the situation progresses.

Please click on the link below to access now

https://www.amp.com.au/wps/portal/au/AMPAUGuidanceTopic3C?vigurl=%2Fvgn-ext-templating%2Fv%2Findex.jsp%3Fvgnextoid%3Dc1efd74a896b1310VgnVCM1000001903400aRCRD

Morningstar economic update Jun 2011

2011-06-29T14:00:00+00:00

Morningstar economic update May/Jun 2011
15 June, 2011
Outlook for Investment Markets
Investors had second thoughts about the strength of economic activity over the past month, and equities and commodities were sold off. Bonds were the winner, additional 'safe haven' demand emerging as Eurozone debt problems intensified. Although global economic recovery is still intact, and growth-linked assets should perform well in time, investor focus in coming months is likely to remain more on downside risks than on upside potential

Australian Cash & Fixed Interest – Review
There was no change at the short end of the interest rate curve, 90-day bank bills continuing to yield just under five percent. Longer-term yields fell over the past month, in line with the global trend, 10-year Commonwealth bonds yields down from 5.50 to 5.30 percent and longer-dated swap rates down by similar amounts. The $A had another eventful month, at one point almost getting over the $US1.10 mark before being sideswiped by a sharp fall in global commodity prices in May. The $A ended the month down against the $US (from $US1.075 to $US1.055), and also modestly weaker (-0.60 percent) in overall trade-weighted value.

Australian Cash & Fixed Interest – Outlook
At its policy meeting on 3 May, the Reserve Bank of Australia stated that on present policy settings, underlying inflation was heading for over three percent in late 2012 and 2013. The Bank saw "the current mildly restrictive stance of monetary policy as remaining appropriate" for a while yet, but given the inflation outlook, "higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target". Financial markets are not expecting much of a further tightening, however, bank bills expected to be only 0.25 percent higher by this time next year.

Overseas trends are likely to remain the main influence on local bond yields. Eurozone debt worries are likely to keep yields in the more creditworthy markets at their current low levels, or even take them lower again on 'safe haven' grounds in coming months. On the other side of the Eurozone issues, however, there is likely to be a move to gradually higher global bond yields in 2012. The extent of the rise locally may be modest, however, as Australia's fiscal accounts and the associated limited supply of new Commonwealth bonds in good shape compared to many other government bond markets.

Most forecasters regard the current high level of the $A as unsustainable, and overvalued from the perspective of non-mining exporters. The Reserve Bank noted that "recent rises in the exchange rate [are] likely to have further tightened conditions, particularly in some sectors of the economy". While the consensus is that a weaker $A would be welcome, any depreciation could still be a long way off in a world economy still growing at above-trend rates and hence benefiting commodity currencies like the $A. The Bank also noted a further supporting influence, purchases by other central banks to invest their official reserve assets.

Australian & International Property – Review
The Australian listed property sector reverted to something like its pre-financial crisis behaviour over the past month, providing a relatively defensive result when the wider sharemarket was weakening. The S&P/ASX 200 A-REITs Index was down -2.10 percent in capital value, compared to the wider market's five percent decline. On an all-up basis, including income, the decline was -1.30 percent.
Global listed property also provided some defensive value, the EPRA/NAREIT index of global property ex-Australia hedged into $A ending up down only very slightly (-0.30 percent) for the past month. The best markets were in Europe, which gained 3.30 percent overall in euro terms, French prices up 4.90 percent. The laggards were in Asia, which experienced a 2.60 percent decline in $US terms as a whole.

Australian & International Property – Outlook
Investors are currently paying more attention to the potential risks to growth, and in this more wary environment have been buying bonds and selling the equities most exposed to world growth. While this more nervous state of mind prevails, the defensive characteristics of listed property, both domestically and overseas, are likely to persist in coming months. In particular, yield differentials have widened in property's favour as government bond yields have fallen. Although the pick-up is not large – a six percent dividend yield in Australia from listed property compared with a 10-year bond yield of 5.30 percent – the sector has become more attractive to investors. The risk profile, with rentals and occupancy linked more to domestic demand than to world trade, is also a more attractive proposition in the current market mood.

Although ongoing recovery is generally positive for global property, some pockets of weakness are likely to remain, particularly in the Eurozone. Data from research firm IPD shows that the total return from holding physical property in Europe in 2010 was eight percent in local currency terms, but that within this average, there was a very large country-by-country disparity. This ranged from a return of 15.0 percent in the UK through to Ireland's 2.50 percent fall. These disparities will be at least as large in the coming year as the more peripheral Eurozone markets struggle with financing and austerity. Another potentially risky area is China, where official efforts to rein in inflation and overheated property markets will be aiming to pull off a soft landing, but could potentially misjudge the tightening.

Australian Equities – Review
A period when overseas sharemarkets were having a rethink about various issues – the global economic outlook, commodity price bubbles, the Eurozone debt crisis – was unlikely to be auspicious for local equities, given Australia's leverage to the global economic cycle. And so it proved. All the local indices sagged, the S&P/ASX200 Accumulation Index down five percent over the past month. The miners were down 6.70 percent and financials down six percent. Industrials stocks had a smaller 2.10 percent decline.

Australian Equities – Outlook
The 10 May Budget was a set-piece opportunity for both government and private sector forecasters to update their views on the economic outlook, and on this latest reassessment the outlook is promising. Government numbers suggest four percent growth is likely in the current 2011/12 year (private sector estimates are similar), and nearly as much (3.75 percent) the following year. External demand for export commodities remains the key factor: our export markets are expected to grow by 4.50 percent this year and five percent next.

Consequently, Australia's terms of trade are forecast by Treasury to reach "their highest sustained levels in 140 years, based on strong price rises for Australia's key non-rural commodity exports" (although expected to ease off a bit in coming years from these unprecedented levels). This is underpinning a massive bout of mining and associated infrastructure spending. The volume of business investment is expected to rise by 16.0 percent in 2011/12 and a further 14.50 percent in 2012/13. By mid-2013, on these forecasts, the unemployment rate will be down to 4.50 percent.

There are some headwinds: households are being cautious with their wallets as they pay down debt, and fiscal policy has turned contractionary, while the high exchange rate is affecting export profitability. Indeed, the combination of a very strong $A and relatively high interest rates means that overall monetary policy conditions are tighter than in most OECD economies. But these are glosses on what should be another two good years for the economy and, ultimately, for Australian shares, although in the immediate future the mining stocks in particular will have to cope with investor concerns that shares have become overexuberant about the prospects for global growth and demand.

International Fixed Interest – Review
There were no significant changes to short-term interest rates over the past month, the only news of note being the US Federal Reserve's decision to hold press conferences after each policy meeting. The first, on 27 April, saw Fed Chairman Ben Bernanke announce that the bond buying program ('quantitative easing') would come to an end in June, but that otherwise monetary policy would remain at very supportive levels "for an extended period".

The bond markets were quite a different story, however, where there were two significant developments. Yields in the higher-rated markets, which had been rising, headed back down again. The 10-year US Treasury yield, for example, peaked at just under 3.60 percent on 11 April, but has dropped steadily since, and over the past month has fallen from 3.37 to a little over 3.10 percent. Other major markets followed suit (Germany from 3.30 to 3.10 percent, and the UK from 3.55 to 3.35 percent, for example). This also fed into lower corporate yields, generating capital gains. These lower yields reflected both investors' more sober reassessment of the prospects for global growth, and a measure of 'flight to safety' from the other significant development, the worsening troubles of the more indebted Eurozone governments. The yield on 10-year Greek government bonds, for example, is now over 17.0 percent, and on Irish bonds is 11.30 percent, while Portugal's is just under 10.0 percent.

International Fixed Interest – Outlook
Short-term interest rates will remain low in the major markets. In the US, for example, the financial markets are taking the Fed's "extended period" of low rates to mean that the Fed funds rate will not change this year, and will have risen to only 0.90 percent by the end of 2012. Rates are likely to increase earlier than that in the Eurozone, where the European Central Bank has already raised them once, and may do so again in the next few months given that inflation in the Eurozone was 2.80 percent in April, above the Bank's two percent limit.

Considerable turmoil is likely in bond markets. Default to some degree now looks increasingly odds-on for Greece. Irish default is also possible. Although the Irish government's policy intentions and effectiveness are recognised as being better than Greece's, the sheer scale of the banking meltdown may overwhelm Ireland's best efforts to meet its payments. Default is also not out of the question for Portugal, and recent protests in Spain against fiscal austerity do not bode well for investor confidence in Spanish bonds.

The next few months could well therefore see a continuation of recent trends – money flowing into the higher-rated, safer end of the market and fleeing the problematic issuers. At some point bond yields in the major markets will have to return to more normal levels. But that will remain on hold while Eurozone debt issues are front and centre of investors' minds.

International Equities – Review
As in many other markets over the past month, the period for world shares splits into two. The first period is late April and early May, when world shares were doing well, and the second more recent weeks, when they have sagged. The net effect is that world shares were down marginally for the past month as a whole, the MSCI World Index off 0.50 percent in overseas currency terms. Investors ended up pretty much all square in local currency terms, the $A up 0.60 percent for the period. The developed markets were broadly similar: most were effectively unchanged or down slightly, Japan a bit weaker than the rest as it struggled with various post-disaster issues. The major emerging markets were weaker, however, China and India in particular both down by six percent for the month as they attempt to get to grips with rising inflation.

International Equities – Outlook
Recent weakness reflects greater concerns about the economic and financial outlook. While investors are not outright spooked, they appear to be more wary on a number of fronts. On the economic outlook, the news has mostly been on the weak side of expectations. Most attention was focused on the key US indicators of GDP growth and jobs. Latest news of the former was disappointing – US GDP growth in the March quarter was 1.80 percent at an annual rate, below the consensus forecast of two percent. While some of this – notably the big drop in non-residential construction – can be explained by bad weather, some looked more permanent. The news in the labour market was better. There were 244,000 new jobs in April, more than the expected 185,000, all in the private sector. But even this was tempered by a small rise in the unemployment rate, from 8.80 to nine percent. Investors are having to come to terms with a US economy that hile not relapsing into recession, is not looking quite as strong as before. The Wall Street Journal’s panel of forecasters has cut it estimates of US GDP growth this year from 3.50 to 2.90 percent. This more sober reassessment was also one of the reasons commodity prices dropped suddenly and sharply in May. Significantly, commodities used in industrial production were down most, while the oil price (also linked to economic activity) dropped from nearly $US114/barrel at the end of April to $US99.50, a 12.70 percent decline.<</p>

Investor expectations were also challenged in recent weeks by the worsening of the Eurozone debt crisis. Some form of restructuring of Greek, Irish, or Portuguese debt now seems more likely than not, and this is now as much of a concern to sharemarkets as it has been to the bond markets.

There have, in sum, been some good reasons why world share markets have been more minded to look at the potential risks to economic activity than before. That said, a genuine global recovery is ongoing. In the Reserve Bank's view, "While there were many uncertainties about the world economic outlook, the central scenario was for a continuation of above-trend growth", while the Treasury has commented that "[t]he global economic recovery is gaining momentum, but remains uneven and subject to significant downside risks", although also noted that people ought to remember that "While the balance of risks is to the downside, there are also upside risks to the global recovery. There is potential for a rapid improvement in sentiment and a subsequent surge in investment and activity more broadly, financed from the substantial levels of liquidity sitting idle with banks and corporates, particularly in the United States but also in Japan". Ongoing recovery will in time re-emerge as the key investment driver for world sharemarkets, but for the next few months, looks to be overshadowed by a focus on the risks.

Performance periods refer to the month and three months to 24 May 2011. http://www.rabodirect.com.au/investor-centre/morningstar-economic-updates/2011/may-jun.aspx

$5 billion in 'lost' super - is some of it yours? Let ABH help you find yours!

2011-06-28T14:00:00+00:00

As of June last year there were 6.1 million ‘lost’ or unclaimed super accounts, with a total balance of over $5 billion, according to a recent study by SuperRatings.

It’s not hard to see how this can happen — people change jobs, don’t move their super into their new fund straight away, and eventually forget about small balances they’ve left behind. Once they’ve accumulated a few accounts, it all seems like too much hard work.

So what happens to these unclaimed accounts? For a start, they could attract fees at a rate that is, according to SuperRatings Managing Director Jeff Bresnahan, “close to double that of mainstream superannuation funds”. In other words, if you’ve got an inactive super fund sitting somewhere, it’s being eaten away by high fees — plus you’re not exercising any choice about investment options, so it’s unlikely to be providing good returns. And if you’ve got several inactive funds, you’re paying several sets of account fees. That simply doesn’t make financial sense.

Your lost super could also be taken by the ATO
High fees are not the only threat to unclaimed super funds. Since the introduction of new legislation in October 2010, up to 1.5 million accounts (generally those with less than $200 in them), have been passed on to the ATO. SuperRatings estimates that the ATO received over $100 million in the first transfer of these account balances last year — that’s $100 million that Australians have missed out on.

What’s the solution?
If you don’t want your unclaimed super eroded by multiple fees or taken by the ATO, the solution is simple — find and consolidate your super. While it’s true that locating and consolidating your super may take a little time, particularly if you have several accounts that you haven’t kept track of, think about the long-term benefits. You’re reclaiming your money, saving on multiple sets of fees, and putting the funds where they can start working harder for you. Surely that’s worth it?

The good news is that some of the Government’s proposed changes to super, in particular the SuperStream initiative, will make it easier to identify and consolidate super in the future. For now, the thing to do is talk to us.

Simple step to consolidate:
Step 1: Gather all your super fund details via your statements. Contact ABH to help you find any Lost super obligation free for you. Simply call Contact your ABH Advisor 0755510256 or email admin@abh.com.au we will do the rest and get back to you with a report of your lost super and reccomendation options if you wish.

Want more information?
Everyone’s circumstances are different and there may be risks to consolidating your super. So to make sure your super’s heading in the right direction, please call us first 0755510256.

Australian Underinsurance: One in two industry fund members are underinsured by $100,000 or more

2011-06-16T14:00:00+00:00

Australian Underinsurance: The Cold Hard Facts

Only 31% of Australians insurance their ability to earn an income with income protection insurance. (source: Investigating Income Protection Insurance in Australia, TNS/IFSA, July 2006)
The average insurance claim paid outside of super is $132,537, while the average claim paid from an employer default fund is only $70,000. (source: Underinsurance Project, IFSA/KPMG, May 2005)
62% of people with life insurance exclusively through super accepted the default amount of life cover. (source: Life Broker Life Insurance Report, Sweeney Research, 2010)
Life Insurance cover provided within super is only about 20% of what is required. (source: Rice Warner Actuaries)
One in two industry fund members are underinsured by $100,000 or more. (source: AIST media release, June 2008)
Nearly 50% of Australians said they/their family would not cope financially in the event of their premature death or if an illness or injury stopped them earning an income for more than 3 months and they had to bear the entire costs themselves. (source: Life Broker Life Insurance Report, Sweeney Research, 2010)

What do these figures mean? Default insurance within superannuation is a good basic safety net for a member, but it usually provides inadequate cover.

The best outcome will always come from tailored advice from a licensed Financial Advisor.

Advisors develop a deep understanding of clients personal circumstances and are therefore best placed to ensure a clients personal protection needs are met.

Uptake of insurance in Australia The research confirmed other studies that show Australians are significantly underinsured when it comes to life insurance and income protection insurance. Uptake ratios for life and income protection insurance fall well below those for car/home and health insurances. Q. Which of the following types of insurance do you currently have? Figure 1 - proportion of respondents with different types of insurance While some respondents hold life and income insurance within super, between half and two-thirds of these people accepted the default level of insurance which is typically very low. Uptake of life insurance is higher among: Males and females aged 40-54 and non-singles Those with a mortgage and households with a pre-tax income of $125,000 or higher Uptake of income protection insurance is higher among: Males and females aged under 55 Those with a mortgage and households with a pre-tax income of $125,000 or higher.

Contact You ABH Advisor for an obligation free insurance review today.

From BRIC to BRICS - 2011 Leaders Summit

2011-04-14T14:00:00+00:00

From BRIC to BRICS - 2011 Leaders Summit

Friday, 15 April 2011

The third annual meeting of the "BRIC" Leaders was held on April 14, 2011 in China's southern island province of Hainan. This was the first meeting at which South Africa joined the other BRIC leaders in their annual deliberations, so President Jacob Zuma and newly elected President Dilma Rousseff of Brazil both attended their first meeting of the new "BRICS" group of Leaders, writes Think Global Insights' David Thomas.

It's an opportune time to reflect on the influence of the BRICS on the global economy and, in particular, the emerging role of China as the largest, strongest and most influential of the five BRICS economies.

It is particularly interesting to find South Africa at the BRIC table, as this appears to have been driven more by geo-political than economic reasons. According to Jim O'Neill of Goldman Sachs, the original inventor of the BRIC acronym in 2001: "As far as the economics are concerned, South Africa is one of the more wealthy nations in Africa, and is currently the largest in US$ terms at around $350bn. However, this is quite small, not only by BRIC standards, but compared to some others. For example, Russia is around $1,600bn, nearly five times larger than South Africa, and India is currently similar in size to Russia. Brazil is currently closer to $2bn in size, while China is considerably larger at around $5,500bn. Importantly, there are a number of other economies from the so-called emerging world that are bigger than South Africa. This would include Indonesia (approximately $700bn), Mexico ($1,050bn), Turkey ($725bn) and South Korea ($1,000bn). These four nations, along with each of the BRIC economies, are all 1% or more of global GDP, and what we would increasingly think of as 組rowth economies'. It is tough to see how South Africa matches up to these four countries, never mind the BRIC countries".

It made this next meeting of the "BRICS" leaders even more intriguing for those of us who follow the changing dynamics of the new world order, a world in which the US finds itself as more of an "observer" than the dominant player it once was, and a world in which some of the poorest African, Latin American and Eastern European nations are likely to have increasing influence and power at the expense of their western cousins.

This will inevitably challenge many of the practices, traditions and institutions that have been taken for granted during the last century, and will result in new alliances and groupings of countries who, until quite recently, were heavily dependent on the developed world for foreign aid, investment and financial support.

The global financial crisis of 2008/9 accelerated a process which began back in 2005 or so when China's economic success, and the increasing dependency of the US on China, caused new trading and economic relationships to be formed between the BRIC countries. China started investing heavily in African resources, Russia and India traded energy, IT and military hardware, and Brazil exported iron ore, oil, coal and other commodities to China. Suddenly, the BRIC countries were voting as a "bloc" at WTO negotiations in Doha and collaborating on climate change at Kyoto (and later Copenhagen) creating significant new problems for the original G7 group of nations, which had become the G8 with the inclusion of Russia in 1994.

By 2007, China, India and Brazil were invited as "observers" to G8 meetings and, in the height of the financial crisis, when it was clear that any global response or collaboration was meaningless without the support of China and the other BRICs, the G20 was formed in September 2009. As President Obama acknowledged at the time: "Today, leaders endorsed the G20 as the premier forum for their international economic co-operation. This decision brings to the table the countries needed to build a stronger, more balanced global economy, reform the financial system, and lift the lives of the poorest".

China appears comfortable, indeed actively supportive, of a "multipolar" global system despite their inevitable accession to the position of the world's largest economy, an event that is likely to take place within the next 15 years. China's challenges, issues and problems are internal, not external, and whilst they will keep one eye on global issues, their short and medium term focus is on the internal process of urbanization, industrialization and wealth creation for their 1.3 billion people. It would be wrong to think that the reform of the global economy is as high on China's priority list as might be gathered from reading the western media.

So, what are China's priorities? The answer to this question can be found by reading the 12th Five Year Plan which covers the period from 2011 to 2015 and sets out their core strategies, which I believe can be summarized as follows:

Going West - the transformation of their western provinces and cities into modern, prosperous and new centers of excellence, focusing on the progressive industries of the 21st century (IT, biotech, high value manufacturing) and a cleaner, sustainable environment for their increasingly urban population.

Going Green - continuing investment and commitment to the development of clean technology, renewable energy (hydro, nuclear, solar, wind, biomass and more efficient use of coal and existing energy sources) and clean energy vehicles so as to reduce their dependence on fossil fuels and rapidly improve the environment.

Going Out - continuing the process of diversifying their short and long term assets from the accumulation of US Treasury Bonds to acquiring real corporate assets in overseas markets. Whilst this process started with the pursuit of mines and resources in Africa, Australia, Russia and other resource-rich countries, the priorities are changing with new emerging sectors (e.g. IT, high value manufacturing, agriculture, wine, education) creating new opportunities for foreign companies to participate in China's industrial revolution and nation-building activities. ■

*This article was first published on the China-US Focus web site.

**Thomas David is the CEO of Think Global Insights. David is known in Australia for his experience, credibility and passion for identifying, building and facilitating business and investment relationships between developed and emerging countries, and has led delegations to all of the four BRIC countries. He is a Vice President of the Australia-China Business Council in NSW, a finalist in the Business Entrepreneur and Business Innovation categories for the Austcham Australia China Business Awards, and a regular visitor to China.
David keeps a regular blog. To read more, click here.

Dr Shane Oliver - Economic Update

2011-01-19T14:00:00+00:00

A regular look at economic and market outlook presented by Dr Shane Oliver.

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The BRICs Dream

2008-08-26T14:00:00+00:00

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