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Global and Australian Economy Update: October 2014

2014-10-08T09:27:00.003+11:00

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Global Economy:

Growth in the global economy is continuing at a moderate pace. China's growth has generally been in line with policymakers' objectives, though some data suggest a slowing in recent months. Weakening property markets there present a challenge in the near term. Commodity prices in historical terms remain high, but some of those important to Australia have declined further in recent months.

Volatility in some financial markets has picked up in recent weeks. Overall, however, financial conditions remain very accommodative. Long-term interest rates and risk spreads remain very low. Markets still appear to be attaching a low probability to any rise in global interest rates or other adverse event over the period ahead.

Australian Economy:

In Australia, most data are consistent with moderate growth in the economy. Resources sector investment spending is starting to decline significantly, while some other areas of private demand are seeing expansion, at varying rates. Public spending is scheduled to be subdued. Overall, the Bank still expects growth to be a little below trend for the next several quarters.

Labour market data have been unusually volatile of late. The Bank's assessment remains that although some forward indicators of employment have been firming this year, the labour market has a degree of spare capacity and it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably and is expected to remain relatively modest over the period ahead, which should keep inflation consistent with the target even with lower levels of the exchange rate.

Monetary policy :

Monetary policy remains accommodative. Interest rates are very low and have continued to edge lower over recent months as competition to lend has increased. Investors continue to look for higher returns in response to low rates on safe instruments. Credit growth is moderate overall, but with a further pick-up in recent months in lending to investors in housing assets. Dwelling prices have continued to rise over recent months.

The exchange rate has declined recently, in large part reflecting the strengthening US dollar, but remains high by historical standards, particularly given the further declines in key commodity prices in recent months. It is offering less assistance than would normally be expected in achieving balanced growth in the economy.

Looking ahead:

Looking ahead, continued accommodative monetary policy should provide support to demand and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

In the Board's judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

Ref: http://www.rba.gov.au/

Australian Economy Update: May 2014

2014-05-06T16:39:00.001+10:00

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Global Economy:

Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a better outcome this year, helped by firmer conditions in the advanced countries. China's growth appears to have slowed a little in early 2014 but remains generally in line with policymakers' objectives. Commodity prices in historical terms remain high, though some of those important to Australia have softened further of late.

Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding.

Australian Economy:

In Australia, the economy grew at a below-trend pace in 2013. Recent information suggests moderate growth is occurring in consumer demand and foreshadows a strong expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.

The demand for labour has been weak over the past year and, as a result, the rate of unemployment has risen somewhat. More recently, there has been some improvement in indicators for the labour market, but it will probably be some time yet before unemployment declines consistently. Growth in wages has declined noticeably and this has been reflected more clearly in the latest price data, which show a moderation in growth in prices for non-traded goods and services. As a result, inflation is consistent with the target. If domestic costs remain contained, that should continue to be the case over the next one to two years, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth has picked up a little, while dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.

Looking ahead, continued accommodative monetary policy should provide support to demand, and help growth to strengthen over time. Inflation is expected to be consistent with the 2–3 per cent target over the next two years.

Reference: http://www.rba.gov.au

Australian Super and REST Super insurance premiums to rise by 35%

2014-04-22T10:31:00.000+10:00

Australian Super will substantially increase its death and total and permanent disablement (TPD) insurance premiums due to rising policy costs.

The 35% price hike is due to come in at the end of March and was confirmed by AustralianSuper group executive of membership Paul Schroder.

He told Financial Standard that the decision made due to the fact that policy costs had increased.

"Australia's super fund members have had access to relatively cheap insurance and are seeing premium prices rise across the board," Schroder said.

This price increase comes after AustralianSuper and REST lifted the cost of insurance to their members in the first half of last year.

The two super funds lifted the cost of insurance to their members increasing the cost of its death and total and permanent disablement cover by around 38%, while the cost of income protection cover will increased by 25%

Retail industry fund, REST increased the cost of its death cover by around 45%, with TPD increased by 30% and income protection increased by 3%.

To read a full story, http://www.financialstandard.com.au/news/view/38630370

If you have Australian Super or REST Super and wish to review your insurance options, contact us on www.fortunewealth.com.au.

Australian Economy Update: April 2014

2014-04-01T22:53:00.001+11:00

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.

Growth in the global economy was a bit below trend in 2013, but there are reasonable prospects of a pick-up this year. The United States economy, while affected by adverse weather, continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth. China's growth remains generally in line with policymakers' objectives, though it may have slowed a little in early 2014. Commodity prices have declined from their peaks but in historical terms remain high.

Financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets are well placed to provide adequate funding, though for some emerging market countries conditions are considerably more challenging than they were a year ago.

In Australia, the economy grew at a below trend pace in 2013. Recent information suggests slightly firmer consumer demand over the summer and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have improved from a year ago and exports are rising. But at the same time, resources sector investment spending is set to decline significantly and, at this stage, signs of improvement in investment intentions in other sectors are only tentative, as firms wait for more evidence of improved conditions before committing to expansion plans. Public spending is scheduled to be subdued.

The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. It will probably rise a little further in the near term. Growth in wages has declined noticeably. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time, which should keep inflation consistent with the target, even with lower levels of the exchange rate.

Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth is slowly picking up. Dwelling prices have increased significantly over the past year. The decline in the exchange rate from its highs a year ago will assist in achieving balanced growth in the economy, but less so than previously as a result of the rise over the past few months. The exchange rate remains high by historical standards.

Reference: http://www.rba.gov.au

Australian Dollar hits 2014 high

2014-03-25T19:31:00.000+11:00

The Australian dollar has reached a high for the year, buoyed by expectations of no more interest rate cuts in Australia and hopes Chinese authorities will move to stimulate the economy.

The dollar touched 91.58 US cents in the morning and is hovering near that level, despite a private survey suggesting growth in China's manufacturing sector had slowed to an eight-month low.

Traders are hoping this latest soft data could prompt China's government to take more steps to support growth in the world's second-biggest economy.

They were also awaiting a speech by Reserve Bank deputy governor Philip Lowe, after which he was asked if the dollar was "uncomfortably high" as it continues to hold above 90 US cents.

Dr Lowe said the dollar had declined and this was playing an important role in stabilising the economy.

It was the first of several public appearances by top RBA officials this week, where they would be offered the chance to talk the dollar down.

Westpac senior currency strategist Sean Callow says there are mixed indications from Chinese media as to how likely it is that China's government will introduce more stimulus measures.

"While the first quarter growth number in China's probably going to be a little bit slower, they do have lots of ammunition to make sure that growth doesn't slow down too far," Mr Callow said.

"So it may be a case of looser monetary policy, but perhaps more likely fiscal policy, where there is plenty of spending on infrastructure that is already planned in China in their five-year plan and could be brought forward."

Mr Callow says the currency has been supported by some recent strong domestic data on economic growth, employment and building approvals.

The good news has added to expectations that domestic interest rates will remain on hold, with the Reserve Bank repeatedly stating that "a period of stability" for rates is likely.

Reference: http://www.abc.net.au

RBA confident about economy

2014-02-18T12:16:00.001+11:00

The Reserve Bank of Australia says the local economy is gaining strength thanks to the falling Australian dollar and the impact of previous interest rate cuts.

In the minutes of its February 4 board meeting, the RBA made it abundantly clear that it won't be cutting the cash rate in the coming months.

"If the economy evolved broadly as expected, the most prudent course would likely be a period of stability in interest rates," the RBA said in the minutes released on Tuesday.

In just over two years the RBA has made a series of reductions in the cash rate taking it to a record low of 2.5 per cent from 4.75 per cent in November 2011.

The minutes noted that the Australian dollar has fallen three per cent on average against other currencies in two months and is 15 per cent below its most recent peak in 2013.

"If sustained, a lower exchange rate would be expansionary for economic activity and assist in achieving balanced growth in the economy," the RBA said.

"The board had judged that given the substantial degree of monetary policy stimulus already in place, it was prudent to keep policy unchanged, while assessing the continuing impact of that stimulus."

Official figures released last week showed that the unemployment rate rose to six per cent in January, its highest for 10 years.

However the RBA appears to be unconcerned about any weakness in employment growth.

"Members recognised that conditions in the labour market tended to lag economic growth, and that the labour market had remained weak following a period of below-trend growth in activity," the RBA said.

"Forward looking indicators of labour demand, such as vacancies and job advertisements, had shown signs of stabilising in recent months but remained at low levels and were consistent with only moderate growth of employment in the months ahead.

"While weak conditions in the labour market had weighed on consumption growth, the increase in housing and equity prices over the past year raised the possibility that consumption growth could outpace that of income in the period ahead."

The RBA said economic growth will strengthen in 2014 but stay at a below trend pace and then increase to an above trend pace by mid 2016.

RBA last cut the cash rate by a quarter of a percentage point to a new record low of 2.5 per cent at its August 6 board meeting.

Ref source: http://au.finance.yahoo.com/news/rba-confident-economy-003420110.html

Australian Business News: 12 November 2013

2013-11-12T10:13:00.004+11:00

Market Update: 12 November 2013

Global markets mixed amid low trading volumes on Wall Street

The Dow Jones Industrial Average modestly extended its five-week rally adding 21 points to close at 15,783, a new record high.

The S&P 500 was unchanged closing at 1,771.

Proportion of first home buyers entering Australia's property market hits a record low, as risky lending rises

The bureau's data show the proportion of first home buyers dipped to 12.5 per cent in September, the lowest level since it started collecting the figures in July 1991 - the previous low was 12.8 per cent in March 2004.

$A lower against strong greenback

A SURPRISINGLY strong US jobs report continues to weigh on the Australian dollar in the absence of any other significant economic data.

Australian market set for gains

THE Australian market looks set to open higher following gains on international markets as dealers digest positive data from the US and China

Ref: www.abc.net.au and www.news.com.au

Cost of living: A key election issue for Australians

2013-07-08T12:20:00.000+10:00

The cost of living will be a key election issue when Australians head to the polls.

Australia is often named among the most expensive places to live in the world, and many people are being squeezed at the margins.

But many researchers say data shows we have never had it so good and that in real terms, many Australians are taking home more money than ever before.

The ABC has spoken to a student, a pensioner and a family of four to find out their views on the cost of living in Australia.

The student

Sarah McElholum, 24, works full-time at a bottle shop. In the evenings, she is studying a double masters degree.

She is based in Melbourne and lives in the inner-city suburb of Richmond.

Ms McElholum spends about half of her monthly allowance on rent and bills and uses public transport to get to work and university every day.

She says the cost of public transport is far too high.

"Because I'm a masters student I don't get full concession rates, so I pay full rates for the transport which is $7 a day, and I use it every day so it comes to quite a lot," she said.

"I think public transport needs to be looked into for people living in the inner-city because they are the ones using it every single day.

"It needs to be cheaper, because overseas it's a lot cheaper."

Ms McElholum lives in a rundown terrace in Richmond, which she shares with two other people.

She pays about $180 per week to live there, and says the cost of rent is "ridiculous".

"I think when I was living in Prahran (a nearby suburb) I was paying a very similar amount for a much smaller house," she said.

"It got to the point where it was just so expensive that - bills on top - you were just living month-by-month.

"I wasn't saving anything while I was there.

"Most people earn under what I earn so it's definitely excessive.

"They need to look into rent prices in the inner-city. If they want people to get off the road, they want people to work and live closer to the city and to use public transport, rent is ridiculous."

The pensioner

Retired painter and decorator Jack Pool is 81 years old and lives in the Brisbane suburb of Stafford.

He was married for 53 years before his wife died four years ago.

Mr Pool is the president of the Stafford Meals on Wheels service.

He is on the aged pension and receives about $800 a fortnight but has no superannuation.

"If you're careful you can live on it," Mr Pool said.

"It doesn't allow you to relax by going on a holiday once every couple of years, it's adequate provided you don't want to do those things.

"But we all need a break, even if you sit at home all the time you need a break, you need to get out of the four walls and go to the movies and things like that to communicate with people.

"When I was working, there was enough to make ends meet, we were able to go on holidays with the family.

"I've got four children and we were able to have a holiday every 12 months.

"In some cases before I became a sales manager, being a painter by trade, I used to go and work on Saturdays and Sundays to get a little bit of extra money so that the children could get a little bit more.

"Going from that to the pension was pretty hard in the first place because of superannuation, lack of, and then when my wife passed away it became a little bit harder.

"I do all my own housework because I can't afford to get anyone to come in and clean the house and I do the yard."

He says the cost of living is high and pensioners need more help financially.

"I think that we pensioners need more assistance generally from other organisations or other governments," he said.

"It's all the expenses with gas, electricity, food, generally right through the whole thing, it's gone up drastically."

Mr Pool says he is living as cheaply as he can.

"I cut corners pretty good, being where I am here at Meals on Wheels and seeing how a lot of the other people are living against what I'm doing," he said.

"I'd find it very very difficult to cut back on anything because I don't do anything that costs money.

"Probably about once every two or three months I'll go out and buy myself some dinner, when I get tired of cooking for myself."

He says he is not saving money because he has had to have two eye operations in the past few months.

"When you pay for those it's very hard to try and get some money," he said.

Mr Pool's 41-year-old son lives with him and does contribute to some bills.

"He will give me money if I want it, but I don't like doing that with my children because I need to live on what I get," Mr Pool said.

But Mr Pool says he believes there are many Australians who underestimate how well they are doing.

"There's a lot of Australians that are pretty well off, that say they're struggling but next thing they're telling you 'we're going on our second overseas trip for this year'.

"This is a really good question - could (these people) do better by doing more, helping people and the community instead of using their money to go overseas all the time?

"I think it's something they should sit down and take a good look at themselves and see what they could do."

The family

The Bell family lives at Alkimos, 40 kilometres outside Perth.

Marnie Bell is a library officer who works two days a week and her husband Simon is a teacher.

"About 40 per cent goes on the mortgage, and then normally not too far behind that is probably groceries, daycare costs a fair chunk - that's probably at least 10 to 20 per cent, and at the end after we've paid the electricity bill and that sort of stuff if anything unexpected pops up, you haven't got much left over," Mr Bell said.

Ms Bell says she has to work to supplement her husband's income, and after tax they make between $80,000 to $90,000 a year.

"I do like working but it is very hard trying to combine that with having young ones," she said.

"Sometimes at the end of the day, by the time you pay your day care, you're not really much better off.

"So we actually looked at whether I was better off not working and what sort of family assistance we'd get, because at the moment we don't qualify with our combined incomes even though I only work two days a week.

"I do enjoy it because it's a good balance, but I do find it very difficult and there's some days I just think it would be so much easier if I could just focus on looking after the kids and being a mum rather than trying to balance everything.

"At the end of the day, even though a big chunk of it (the money) goes to daycare, we still come out ahead."

The Bells say the family does not go out very often.

"We were just talking about that the other day, even going to the movies, by the time you get your ticket and popcorn and all that you can easily spend $60 or whatever and you've just gone to see a movie," Ms Bell said.

"We try and do stuff that doesn't cost too much, because if we do then we pay for it later on because we might not be able to make ends meet when the bills come in."

Ms Bell says people have high expectations for their standard of living.

"I think as a whole yeah, people expect to have everything, they want to have the house, the car, the holidays, the latest iPhone all that sort of stuff," she said.

"I think as a society you think that's what people expect but I think in reality it is probably a small proportion of people that really do go and get all that sort of stuff."

Cost of living: What researchers say

A cross-section of economic data points to the overall cost of living in Australia growing at a much slower pace than wages.

It concludes households are better off than 10 years ago because their income rose faster than the cost of living over that period.

INFOGRAPHIC: Household expenses 2002-2012
(Roy Morgan)

Ben Phillips from the National Centre for Social and Economic Modelling (NATSEM) has looked at the cost of living over the past decade.

"Australian households are really doing exceptionally well," he said.

"What we found over the past decade, is that Australian households are ahead of their cost of living on an average by about $225 per week, so this is a substantially strong result for Australian households.

"And we find this result holds for both high-income households and also low-income households, so they've all had very strong increases in their incomes relative to their cost of living or prices in the economy."

Mr Phillips says there is a range of perceptions on whether or not we are doing well as a nation.

"I think overall we do get told very much on a daily basis by politicians and by the media that times have never been tougher, but the evidence would certainly not really back that up," he said.

"We also hear that electricity prices are very high, that petrol prices are high, and to some extent this is certainly true.

"There is an element of bill shock that comes every quarter with opening up the quarterly electricity bill or gas bill.

"So we do have issues around, but we seem to not reflect enough on where our incomes are and where they were in the past.

"We've seen household income growing by around 5 or 6 per cent annually for many years now, whereas we've had inflation growing by only 2 to 3 per cent over the past 10 or 20 years.

"Overall we've been creeping ahead of our costs, so as a result of that households are really a long way ahead of their cost of living which is quite different to what the rhetoric is that we hear."

The NATSEM research compared economic data from 2003 to 2009/2010.

The cost of housing

An Australian home now costs about seven times the average household income - that is up from four times an average household income in 1996.

Ms McElholum says owning a home is a pipedream for her generation.

"We're going to have a lot of people that are owning houses that have three or four homes who are going into that market because they're earning money and getting a lot more profit on it," she said.

"A lot of my friends say that they think 'I'll never own a house, I'll never be a home owner, it's too expensive'."

She says governments need to think about planning strategies for housing, especially in cities.

"There's not enough desired housing in the city, so a lot of people in my age group don't really want to look at apartments because they want space," she said.

"It's not just that, they want to play music and if you look at the city all the apartments they're making now they don't have soundproofing.

A lot of my friends say that they think 'I'll never own a house, I'll never be a home owner, it's too expensive'.

Sarah McElholum

"You're so close, paper-thin walls to next door, you can't be a young person and have neighbours that are that close because obviously they get noise complaints, you get issues like that.

"In my old place, that was definitely a problem.

"My neighbours were an elderly couple and they would call the cops at 9.00pm on a Saturday night.

"There's just two different worlds there and in an apartment, you're just that much closer."

Mr Pool is glad he owns his own home.

"One thing that helps me is that I own my own home and I own my own car," he said.

"But being with Meals on Wheels, I find that a lot of our clients who don't have that are really suffering because the pension is definitely not enough for them to even feed themselves properly."

Ms Bell says buying a home in the city has proved difficult.

"I was able to buy a duplex about eight years ago just before the boom, so that was great.

"But when it came time to sell, even though I made money on that, we then also bought in the boom and when we went to sell that one we actually lost money.

"I've got some older friends who just happened to have a house in the right place, it seems to be for Perth the price goes by location so the closer you are to Perth it doesn't matter the condition of the house, it's more the land.

"So people just happened to have a place that when they bought it, it wasn't that much and they obviously made a lot of money on those and that's how they've done okay.

"Wages have definitely gone up, but [housing prices] went up way more than what wages did, and then sort of dropped right down so a lot of people struggled in that way.

"When they were trying to sell they lost money that way.

"This is why we live 40 kilometres from Perth and people go on and on about us living so far away but we could not afford anywhere near Perth."

Ref: http://www.abc.net.au/news/2013-07-08/cost-of-living-weighs-on-minds-of-australians/4804728?section=business

Reserve Bank of Australia has reduced the cash rate to 2.75%

2013-05-07T14:50:00.000+10:00

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 2.75 per cent, effective 8 May 2013.

The global economy is likely to record growth a little below trend this year, before picking up next year. Among the major regions, the United States continues on a path of moderate expansion and China's growth is running at a more sustainable, but still robust, pace. Japan has announced significant new policy initiatives aimed at strengthening demand and ending deflation. The euro area remains in recession. Commodity prices have moderated a little in recent months though they remain high by historical standards.

Financial conditions internationally continue to be very accommodative, with risk spreads reduced, funding conditions for most financial institutions improved and borrowing costs for well-rated corporates and sovereigns exceptionally low.

Growth in Australia was close to trend in 2012 overall, but was a bit below trend in the second half of the year, and this appears to have continued into 2013. Employment has continued to grow but more slowly than the labour force, so that the rate of unemployment has increased a little, though it remains relatively low.

With the peak in the level of resources sector investment likely to occur this year, there is scope for other areas of demand to grow more strongly over the next couple of years. There has been a strengthening in consumption and a modest firming in dwelling investment, and prospects are for some increase in business investment outside the resources sector over the next year. Exports of raw materials are increasing as increased capacity comes on stream. These developments, some of which have been assisted by the reductions in interest rates that began 18 months ago, will all be helpful in sustaining growth.

Recent data on prices confirm that inflation is consistent with the target and, if anything, a little lower than expected. The CPI rose by 2½ per cent over the past year, and measures of underlying inflation gave a broadly similar outcome. These results have been pushed up a little by the impact of the carbon price. Growth of labour costs has moderated slightly over recent quarters while productivity growth appears to be improving. This should help to lessen increases in prices for non-tradables. The Bank's forecast remains that inflation over the next one to two years will be consistent with the target.
Over recent meetings, the Board has noted that interest rates have already been reduced substantially, with borrowing rates approaching previous lows, and that the effects of this on the economy are continuing to emerge. Savers have been changing their portfolios towards assets with higher expected returns, asset values have risen and some interest-sensitive areas of spending have increased.
The exchange rate, on the other hand, has been little changed at a historically high level over the past 18 months, which is unusual given the decline in export prices and interest rates during that time. Moreover, the demand for credit remains, at this point, relatively subdued.

The Board has previously noted that the inflation outlook would afford scope to ease further, should that be necessary to support demand. At today's meeting the Board decided to use some of that scope. It judged that a further decline in the cash rate was appropriate to encourage sustainable growth in the economy, consistent with achieving the inflation target.

AUSTRALIAN PROPERTY UPDATE: Home prices surge in January in all major cities

2013-02-03T23:17:00.002+11:00

AUSTRALIAN PROPERTY UPDATE: Home prices surge in January in all major cities

A widely watched home value index shows prices surged in most capital cities in the first month this year.

The RP Data - Rismark Home Value Index jumped 1.2 per cent across Australia's capital cities in January.

The strong monthly gain means Australian capital city home prices are now up rather than down over the past 12 months.

PERFORMANCE OF AUSTRALIAN CITIES:

Hobart had the biggest monthly gain of 4.5 per cent, pulling its prices to a 0.8 per cent rise over the past year.

Brisbane's prices were up 2 per cent, resulting in a 2.3 per cent gain since January 2012.

Sydney continued a steady positive run, with prices up 1.8 per cent in January, for a 3.4 per cent gain over the past year.

Perth also had a relatively solid run, with a 1.7 per cent rise last month for a 2.7 per cent gain since January 2012.

However, Melbourne has lagged again among the capital cities, with a 0.2 per cent rise in January leaving prices down 0.4 per cent over the past year.

Adelaide prices also failed to match the strong gains elsewhere, rising 0.4 per cent in January and 0.7 per cent over the past 12 months.

The two territory capitals had divergent performance: Canberra recorded a 1.5 per cent rise in January and 2.7 per cent over the past year; but Darwin prices fell 2.2 per cent last month, although were still 8.7 per cent higher over the past year.

House prices outside the state and territory capitals eased 1.1 per cent in December, and fell 0.7 per cent over 2012.

Book a no obligation consultation today with financial adviser on 03 9018 5534 and discuss your options.

Reference: abc.net.au

Which Australian city is performing best?

2012-12-04T22:11:00.000+11:00

2012 was a mixed bag for property in Australia, with the market um-ing and ah-ing its way toward a cautious, gentle upturn, as the rest of the world covetedour homes.

The year kicked off with a fall in new home sales and an RBA decision to leave interest rates on hold at 4.25%.

The first interest rate cut of the year came in May, to 3.75%, in response to weaker than predicted economic conditions, with cuts following in May, June and October.

Rismark International CEO, Ben Skilbeck cautioned that even with a December interest rate cut, Australians would have to wait until early 2013 to see a meaningful housing market response.

Home values in capital cities finished the year with a rise across the board, except for Melbourne.

Confidence in the market has steadily increased throughout 2012. TheWestpac-Melbourne Institute Consumer Sentiment Index shows an upward trend since April, reaching the highest level in 12 months in November 2012.

The Index looks closely at when consumers feel confident about buying a dwelling, and that number has improved significantly across 2012, with the national index is now showing the highest reading since September 2009.

RP Data analyst Tim Lawless says this it's a clear indicator we're getting more confident about the property market and are optimistic about the new year.

The Commonwealth Bank-Mortgage and Finance Association of Australia (MFAA) home finance index, released in late October, found 75.8% of people believed house prices would grow or remain stable for the remainder of 2012, further signalling a confidence boost to round out the year.

realestate.com.au's second annual Housing Affordability Index (HASI) told a similar story.

Though 84% of survey respondents admitted upward pressure on living expenses was a challenge to their property goals, 27% said they expected their financial position would improve in the near term, and most states and territories forecast slow but stready improvement ahead. Gen Y was feeling upbeat about the long term.

As we finish up 2012, RP Data Rismark has revealed its last batch of property headlines.

Best performing capital city: Darwin +3.1%
Weakest performing capital city: Hobart, -4.5%
Highest rental yields: Darwin houses with gross rental yield of 5.9% and Darwin Units at 6.2%
Lowest rental yields: Melbourne houses with gross rental yields of 3.7% and Melbourne units at 4.4%
Most expensive city: Sydney with a median dwelling price of $555,000
Most affordable city: Hobart with a median dwelling price of $305,875

Reference: www.realestate.com.au

Australian Economy Update: Statement by Glenn Stevens, Governor Nov 2012

2012-11-07T00:11:00.002+11:00

At its meeting today, the Board decided to leave the cash rate unchanged at 3.25 per cent.

Global growth is forecast to be a little below average for a time. Risks to the outlook are still seen to be on the downside, largely as a result of the situation in Europe, where economic activity is still contracting. Risks elsewhere seem more balanced. The United States is recording moderate growth, while recent data from China suggest growth there has stabilised. Around Asia generally, growth has been dampened by the more moderate Chinese expansion and the weakness in Europe.

Key commodity prices for Australia remain significantly lower than earlier in the year, though trends have been more mixed over the past couple of months, with some prices recovering some ground while others declined further. The terms of trade have declined by about 13 per cent since the peak last year, but are likely to remain historically high.

Financial markets have responded positively over the past few months to signs of progress in addressing Europe's financial problems, but expectations for further progress remain high. Long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis. Borrowing conditions for large corporations are similarly attractive. Share markets have generally risen over recent months.

In Australia, most indicators available for this meeting suggest that growth has been running close to trend over the past year, led by very large increases in capital spending in the resources sector. Looking ahead, the peak in resource investment is likely to occur next year, at a lower level than expected six months ago. As this peak approaches, the Board will be monitoring the strength of other components of demand.

Some of the consumption strength in the first half of 2012 was temporary, but there have been some signs of ongoing growth, though a return to very strong growth in consumption is unlikely. While investment in dwellings has been subdued for some time, over recent months there have been some indications of a prospective improvement. Non-residential building investment has remained weak. Public spending is forecast to be subdued.

Recent outcomes on inflation were slightly higher than expected, though they still show inflation consistent with the medium-term target, with underlying measures around 2½ per cent over the year to September, and headline CPI inflation a little lower than that. The introduction of the carbon price affected consumer prices in the September quarter, and there could be some further small effects over the next couple of quarters. With the labour market having generally softened somewhat in recent months, and unemployment edging higher, conditions should work to contain pressure on labour costs in sectors other than those directly affected by the current strength in resources. This and some continuing improvement in productivity performance will be needed to keep inflation low, since the effects on prices of the earlier exchange rate appreciation are now waning. The Bank's assessment remains that inflation will be consistent with the target over the next one to two years.

Over the past year, monetary policy has become more accommodative. Interest rates for borrowers have declined to be clearly below their medium-term averages and savers are facing increased incentives to look for assets with higher returns. While the impact of these changes takes some time to work through the economy, there are signs of easier conditions starting to have some of the expected effects. Business demand for external funding has increased this year, the housing market has strengthened and share prices have risen in line with markets overseas. The exchange rate, though, remains higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

Further effects of actions already taken to ease monetary policy can be expected over time. The Board will continue to monitor those effects, together with information about the various other factors affecting the outlook for growth and inflation. At today's meeting, with prices data slightly higher than expected and recent information on the world economy slightly more positive, the Board judged that the stance of monetary policy was appropriate for the time being.

Australian economy update: Statement by Glenn Stevens, Governor Oct 2012

2012-10-02T15:15:00.002+10:00

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 3.25 per cent, effective 3 October 2012.

The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside. Economic activity in Europe is contracting, while growth in the United States remains modest. Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago. Around Asia generally, growth is being dampened by the more moderate Chinese expansion and the weakness in Europe.

Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks. The terms of trade have declined by over 10 per cent since the peak last year and will probably decline further, though they are likely to remain historically high.
Financial markets have responded positively over the past few months to signs of progress in addressing Europe's financial problems, but expectations for further progress remain high. Low appetite for risk has seen long-term interest rates faced by highly rated sovereigns, including Australia, remain at exceptionally low levels. Nonetheless, capital markets remain open to corporations and well-rated banks, and Australian banks have had no difficulty accessing funding, including on an unsecured basis. Share markets have generally risen over recent months.

In Australia, most indicators available for this meeting suggest that growth has been running close to trend, led by very large increases in capital spending in the resources sector. Consumption growth was quite firm in the first half of 2012, though some of that strength was temporary. Investment in dwellings has remained subdued, though there have been some tentative signs of improvement, while non-residential building investment has also remained weak. Looking ahead, the peak in resource investment is likely to occur next year, and may be at a lower level than earlier expected. As this peak approaches it will be important that the forecast strengthening in some other components of demand starts to occur.

Labour market data have shown moderate employment growth and the rate of unemployment has thus far remained low. The Bank's assessment, though, is that the labour market has generally softened somewhat in recent months.

Inflation has been low, with underlying measures near 2 per cent over the year to June, and headline CPI inflation lower than that. The introduction of the carbon price is affecting consumer prices in the current quarter, and this will continue over the next couple of quarters. Moderate labour market conditions should work to contain pressure on labour costs in sectors other than those directly affected by the current strength in resources. This and some continuing improvement in productivity performance will be needed to keep inflation low as the effects of the earlier exchange rate appreciation wane. The Bank's assessment remains, at this point, that inflation will be consistent with the target over the next one to two years.
Interest rates for borrowers have for some months been a little below their medium-term averages. There are tentative signs of this starting to have some of the expected effects, though the impact of monetary policy changes takes some time to work through the economy. However, credit growth has softened of late and the exchange rate has remained higher than might have been expected, given the observed decline in export prices and the weaker global outlook.

At today's meeting, the Board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target. The Board therefore decided that it was appropriate for the stance of monetary policy to be a little more accommodative.

Australian economy update: Statement by Glenn Stevens, Governor May 2012

2012-05-01T18:33:00.002+10:00

Statement by Glenn Stevens, Governor: Monetary Policy Decision

At its meeting today, the Board decided to lower the cash rate by 50 basis points to 3.75 per cent, effective 2 May 2012. This decision is based on information received over the past few months that suggests that economic conditions have been somewhat weaker than expected, while inflation has moderated.

Growth in the world economy slowed in the second half of 2011, and is likely to continue at a below-trend pace this year. A deep downturn is not occurring at this stage, however, and in fact some forecasters have recently revised upwards their global growth outlook. Growth in China has moderated, as was intended, and is likely to remain at a more measured and sustainable pace in the future. Conditions in other parts of Asia softened in 2011, partly due to natural disasters, but have recently shown some tentative signs of improving. Among the major countries, conditions in Europe remain very difficult, while the United States continues to grow at a moderate pace. Commodity prices have been little changed, at levels below recent peaks but which are nonetheless still quite high. Australia's terms of trade similarly peaked about six months ago, though they too remain high.

Financial market sentiment has generally improved this year, and capital markets are supplying funding to corporations and well-rated banks. At the margin, wholesale funding costs have declined over recent months, though they remain higher, relative to benchmark rates, than in mid 2011. Market sentiment remains skittish, however, and the tasks of putting European banks and sovereigns onto a sound footing for the longer term, and of improving Europe's growth prospects, remain large. Hence Europe will remain a potential source of adverse shocks for some time yet.

In Australia, output growth was somewhat below trend over the past year, notwithstanding that growth in domestic demand ran at its fastest pace for four years. Output growth was affected in part by temporary factors, but also by the persistently high exchange rate. Considerable structural change is also occurring in the economy. Labour market conditions softened during 2011, though the rate of unemployment has so far remained little changed at a low level.

Recent data for inflation show that after a pick up in the first half of last year, underlying inflation has declined again, and was a little over 2 per cent over the latest four quarters. CPI inflation has also declined, from about 3½ per cent to a little over 1½ per cent at the latest reading, as the weather-driven rises in food prices in the first half of last year have, as expected, now been fully reversed. Over the coming one to two years, and abstracting from the effects of the carbon price, inflation will probably be lower than earlier expected, but still in the 2–3 per cent range.

As a result of changes to monetary policy late last year, interest rates for borrowers have been close to their medium-term averages over recent months, albeit tending to increase a little as lenders passed on the higher costs of funding their books. Credit growth remains modest overall. Housing prices have shown some signs of stabilising recently, after having declined for most of 2011, but generally the housing market remains subdued. The exchange rate remains high even though the terms of trade have declined somewhat.

Since it last changed the cash rate in December, the Board has maintained the view that the setting of policy was appropriate for the time being, but that the inflation outlook would provide scope for easier monetary policy, if needed, to support demand. The accretion of evidence over recent months suggests that it is now appropriate for a further step in that direction.

In considering the appropriate size of adjustment to the cash rate at today's meeting, the Board judged it desirable that financial conditions now be easier than those which had prevailed in December. A reduction of 50 basis points in the cash rate was, in this instance, therefore judged to be necessary in order to deliver the appropriate level of borrowing rates.

Carbon pricing: Facts and numbers

2012-03-14T09:02:00.000+11:00

Source: http://www.abc.net.au/

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Australian economy update: Statement by Glenn Stevens, Governor March 2012

2012-03-06T15:27:00.000+11:00

At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.

Recent information is consistent with the expectation that the world economy will grow at a below-trend pace this year, but does not suggest that a deep downturn is occurring. Several European countries will record very weak outcomes, but the US economy is continuing a moderate expansion. Growth in China has moderated as was intended, but on most indicators remains quite robust overall. Conditions around other parts of Asia softened in 2011, partly due to natural disasters, but are not showing signs of further deterioration. Some moderation in inflation has allowed policymakers in the region to ease monetary policies somewhat. Commodity prices declined for some months and are noticeably off their peaks, but over the past couple of months have risen somewhat and remain at quite high levels.

The acute financial pressures on banks in Europe have been alleviated considerably by the actions of policymakers, though there is more to do to put European banks and sovereigns onto a sound footing for the longer term and Europe will remain a potential source of shocks for some time yet. Financial market sentiment has continued to improve in recent weeks and capital markets are again supplying funding to corporations and well-rated banks, albeit at costs that are higher, relative to benchmark rates, than in mid 2011.

Most information on the Australian economy continues to suggest growth close to trend overall, with differences between sectors and considerable structural change. Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months. CPI inflation has declined as expected and will fall further over the next quarter or two. In underlying terms, inflation is around 2½ per cent. Over the coming one to two years, and abstracting from the effects of the carbon price, the Bank expects inflation to be in the 2–3 per cent range. This forecast embodies an expectation that productivity growth will improve somewhat as a result of the structural change occurring in the economy.

Interest rates for borrowers have generally risen slightly since the Board's previous meeting, but remain close to their medium-term average. Credit growth remains modest. Housing prices have shown some sign of stabilising recently, after having declined for most of 2011, but generally the housing market remains soft. The exchange rate has risen over recent months, even though the terms of trade have declined.

With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy remained appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.

Australian economy update: Statement by Glenn Stevens, Governor Feb 2012

2012-02-08T16:48:00.000+11:00

At its meeting today, the Board decided to leave the cash rate unchanged at 4.25 per cent.

Information becoming available since the December meeting confirms that economic conditions in Europe were weakening late last year, with risks still skewed to the downside. Reflecting this, most forecasters have lowered their forecasts for world GDP growth this year to a below trend pace. That said, recent data from the United States suggest a continuing moderate expansion after a soft patch in mid 2011. Growth in China has moderated as was intended, but on most indicators remained quite robust through the second half of last year. Conditions around other parts of Asia have softened. Commodity prices declined for some months to be noticeably off their peaks, but over the past couple of months have risen somewhat and remain at quite high levels.

The acute financial pressures on banks in Europe were alleviated considerably late in 2011 by the actions of policymakers. Much remains to be done to put European sovereigns and banks on a sound footing, but some progress has been made. Financial market sentiment, though remaining skittish, has generally improved since early December. Share markets have risen and term funding markets have re-opened, including for Australian banks, albeit at increased cost compared with the situation prevailing in mid 2011.
Information on the Australian economy continues to suggest growth close to trend, with differences between sectors. Labour market conditions softened during 2011 and the unemployment rate increased slightly in mid year, though it has been steady over recent months. CPI inflation has declined as expected, as the large rises in food prices resulting from the floods a year ago have been unwinding. Year-ended CPI inflation will fall further over the next quarter or two. In underlying terms, inflation is around 2½ per cent. Over the coming one to two years, and abstracting from the effects of the carbon price, the Bank expects inflation to be in the 2–3 per cent range.

Credit growth remains modest, though there has been a slight increase in demand for credit by businesses. Housing prices showed some sign of stabilising at the end of 2011, after having declined for most of the year. The exchange rate has risen further, even though the terms of trade have started to decline. This is largely a reflection of a decline in the euro against all currencies. Nonetheless, the Australian dollar in trade-weighted terms is somewhat higher than the Bank had previously assumed.

At today's meeting, the Board noted that interest rates for borrowers have declined to be close to their medium-term average, as a result of the actions at the Board's previous two meetings. With growth expected to be close to trend and inflation close to target, the Board judged that the setting of monetary policy was appropriate for the moment. Should demand conditions weaken materially, the inflation outlook would provide scope for easier monetary policy. The Board will continue to monitor information on economic and financial conditions and adjust the cash rate as necessary to foster sustainable growth and low inflation.

Kind Regards,
Rashesh Bhavsar
Financial Planner

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http://www.rba.gov.au/media-releases/2012/mr-12-02.html

Property Outlook Australia: Rate of decline in the Aussie housing market measured against the US, UK and NZ

2012-02-04T11:53:00.000+11:00

Based on CoreLogic’s House Price Index (HPI), it’s been 69 months since the US housing market peaked. Since the national index for ‘single family combined homes’ reached its high point back in April 2006, US home prices have fallen by 32.8%.

The first three years of US home prices coming down could be characterized as a reasonably steep downwards trajectory. Using a compounding growth rate, between April 2006 and April 2009 the annual rate of decline averaged 11.4% or 30.5% overall. Most of the home value destruction was over and done with in the first three years directly after the market peaked. Home values have come down a further 1.9% year on year (on average) since that time. Note, if you would like a complete run down on the US housing market, you can’t go past the ‘Market Pulse’ report from CoreLogic (January’s report was released last week).
Similarly, in the UK (based on the Halifax Index) the initial period of decline showed the steepest trajectory with home values falling by 10.5% per annum over the first 24 months post peak.
Using Property IQ’s House Price Index for New Zealand we can see a similar trend with the steepest trajectory of decline being recorded across the first 16 months after price peaked (down 9.6% over that period or 7.7% on an average annualized basis).
Looking at Australia, while there isn’t a long time series of data since the market peaked back in October 2010, values are down 3.8% in total (3.5% on an average annualized basis). The downwards trajectory in Australian dwelling values fits reasonably closely with the US trajectory over the same 13 month time frame (US prices were down 4.4% over the first thirteen months post peak compared with the 3.8% fall in the Australian market). Six months later the US market was recording falls of 1-2% month-on-month as the US banking sector imploded, unemployment and mortgage defaults rose swiftly and the GFC spread around the world.
If the November results from the RP Data – Rismark Hedonic Index remain consistent (November month on month result was +0.1% s.a.) and we see another flat result for December, it may provide the best indication yet that the Australian housing market is flattening out. The risk of a US style housing meltdown are looking increasingly remote. The key factors to watch will continue to be interest rates and the labour market data. With inflation tracking lower than expected, speculation about further rate cuts is likely to improve market sentiment. In balance, unemployment is ticking upwards and the banks are looking unlikely to pass on any cash rate cuts in full. Overall I think we can expect market conditions to remain reasonably flat over the first six months of 2012 at least.

Kind Regards,
Rashesh Bhavsar
Financial Planner

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Source: http://blog.rpdata.com/2012/01/how-has-the-rate-of-decline-in-the-aussie-housing-market-compared-with-the-us-uk-and-nz/

Young and healthy, no need for insurance. Think again.

2011-12-19T16:39:00.004+11:00

Former Miss Venezuela Eva Ekvall died in Houston after fighting breast cancer since last year, her representatives said. She was 28.
"Sadly, cancer had the last word," writer Leonardo Padron told Globovision.
Ekvall, an actress and news anchor, died on Saturday after "demonstrating extraordinary calm and courage in her fight against cancer", Padron said, without confirming whether the body would be sent home to Venezuela.
The former beauty queen wrote a book after being diagnosed with breast cancer last year and tried to raise awareness of the disease.
"Now I know what it feels like to not have a hair on your head," she said in a Twitter posting on March 10.
In Venezuela, "we invest a lot of money in looking beautiful and not in health care", the former model said.
Well-known photographer Roberto Mata worked with Ekvall to chronicle her fight against cancer in the book Fuera de Foco.
Source: http://au.news.yahoo.com/world/a/-/world/12399029/former-Miss-Venezuela-dies-at-28
Facts about Breast cancer in Australia:

Every day in Australia, more than 30 women discover they have breast cancer.

Breast cancer is the most common cancer diagnosed in women aged over 35 years — 29% of all cancers diagnosed.

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Kind Regards,
Rashesh Bhavsar
Financial Planner

Fortune Wealth Creation Group
Ground Floor, 566 St. Kilda Road,
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Australian economy update: Statement by Glenn Stevens, Governor Dec 2011

2011-12-07T08:44:00.000+11:00

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.25 per cent, effective 7 December 2011.

Growth in the global economy has moderated this year after a strong performance in 2010. Some of the slowing reflected temporary factors, and as these passed, the pace of expansion in the United States and much of Asia began to pick up around mid year. China's growth has been slowing, as policymakers there had intended. Trade in Asia is now, however, seeing some effects of a significant slowing in economic activity in Europe.

The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on economic activity there over the period ahead. Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe. This, together with precautionary behaviour by firms and households, means that the likelihood of a further material slowing in global growth has increased. Commodity prices have reflected this, declining further over recent months and taking pressure off CPI inflation rates. This has increased the scope for some easing in monetary policy in a number of countries.

Information about the Australian economy suggests output growth has been close to trend, with demand growth stronger than that. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, changed behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little since mid year, though it remains close to 5 per cent.
CPI inflation on a year-ended basis remained above the target at the latest reading, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

The reduction in the cash rate as a result of the Board's previous decision flowed through to lending rates, which are now around their average level of the past 15 years. Short-term market interest rates have tended to decline a little further in recent weeks, though term funding conditions for financial institutions have become more difficult. Credit growth remains subdued and asset prices have declined further over recent months. The exchange rate has been quite variable over the past few months, but remains at an historically high level.

Overall, the Board concluded, on the basis of all the available information, that the inflation outlook afforded scope for a modest reduction in the cash rate. The Board will continue to set policy as needed to foster sustainable growth and low inflation over time.

Cheers,
Rashesh Bhavsar
Financial Planner

Fortune Wealth Creation Group
Ground Floor, 566 St. Kilda Road,
Melbourne VIC 3004

Free Consultation (valued over $660):Call today on 03 9018 5534 or send an email to info@fortunewealth.com.au to book a free financial consultation to find out your personal wealth creation and wealth protection plan for you and your family.

Source: http://www.rba.gov.au/media-releases/2011/mr-11-28.html

Superannuation Update: 12% Employer Contribution and Super Tax Rebate

2011-11-28T14:54:00.001+11:00

Financial planning and superannuation industry bodies have welcomed the Superannuation Guarantee (SG) Bill’s passage through Parliament.
On Wednesday (23 November) the House of Representatives passed legislation on the gradual increase of compulsory superannuation contributions from 9 per cent to 12 per cent.
The legislation includes measures to remove the age limit of the Superannuation Guarantee as well as removing superannuation contributions tax for people earning less than $37,000 per annum.
“The Financial Planning Association (FPA) welcomes the Government’s passing of the Superannuation Guarantee Bill and the measures incorporated to assist our aging population with the incentive to remain in the workforce as well as maximising the retirement benefits for low income earners in Australia,” said Mark Rantall, CEO of the FPA.
“This legislation better supports all workers without discriminating against age or wage. The FPA supports initiatives taken by Government to assist Australians in planning their financial futures and ensuring they are better prepared for retirement.
“An increase in the Superannuation Guarantee and encouragement to seek professional financial advice will enhance the quality of life during retirement, ensure income adequacy, reduce longevity risk and decrease reliance on the age pension for Australia’s ageing population. It is timely that the Government is addressing this national issue now.”
The majority of the reform measures are expected to take effect from 1 July 2013, with the low income rebate commencing from 1 July 2012.
The superannuation industry also welcomed the passage of the mining tax bills package.
The mining tax will support the increase in the SG to 12 per cent, as well as a low-income earners super tax rebate.

Source: http://www.professionalplanner.com.au/superannuation/thumbs-up-for-super-guarantee

Cheers,
Rashesh Bhavsar
Financial Planner

6 Steps to create secure financial future:

Secure your income and have provisions for ongoing income in the event of death or disability
Minimise your tax effectively
Build retirement savings by using superannuation entitlements
Have regular investment plan into diversified investments
Have Will & Enduring Power of Attorney and valid nominations on your super & insurance
Have ongoing review

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Australian economy update: Statement by Glenn Stevens, Governor

2011-11-02T09:51:00.004+11:00

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 4.5 per cent, effective 2 November 2011.

Recent information is consistent with a moderation in the pace of global growth, though fears of a major downturn have not been borne out so far. The pace of US economic expansion picked up in the September quarter, but is still only moderate and leaves considerable spare capacity. China's growth has slowed, as policymakers there had intended. Output in Asia has now recovered from the effects of the Japanese earthquake, and domestic demand in the region is generally expanding. Trade performance, however, is starting to see some effects of a significant slowing in economic activity in Europe, where the prospects are for economic weakness to continue. Commodity prices, while still at high levels, have generally declined over recent months.

Financial markets have recovered somewhat from the turmoil of recent months, helped by stronger economic data in the United States and by signs that European governments are making progress in their efforts to deal with the sovereign debt and banking problems. Equity markets have gained ground and the Australian dollar has risen significantly as risk aversion has lessened. But it is likely to be some time yet before concerns about the European situation can definitively be laid to rest and the effects of the recent turmoil on confidence may result in a period of precautionary behaviour by firms and households.

Information about the Australian economy suggests moderate growth overall. The terms of trade have now peaked and will decline somewhat in the near term, but they remain very high. In response, investment in the resources sector is picking up very strongly, with much more to come. Some related service sectors are enjoying better-than-average conditions. In other sectors, cautious behaviour by households and the high exchange rate have had a noticeable dampening effect. The unemployment rate has increased a little over recent months, though it remains close to 5 per cent.

After underlying inflation started to pick up in the first half of the year, recent information suggests the subdued demand conditions and the high exchange rate have contained inflation more recently, notwithstanding continuing sizeable increases in utilities charges. CPI inflation on a year-ended basis remains above the target, due to the effects of weather events last summer, but is now starting to decline as production of key crops recovers. Moreover, with labour market conditions now softer, the likelihood of a significant acceleration in labour costs outside the resources and related sectors in the near term has lessened. Accordingly, the Bank's current judgement is that inflation is likely to be consistent with the 2–3 per cent target in 2012 and 2013, abstracting from the impact of the carbon pricing scheme.

Financial conditions have been easing somewhat recently, with market interest rates declining a little and competition to lend increasing. But overall conditions have remained tighter than normal, with borrowing rates still a little higher than average, credit growth subdued and asset prices lower than earlier in the year. The exchange rate has been very variable over the past few months, but on the whole has remained at historically high levels.

Over the past year, the Board has maintained a mildly restrictive stance of monetary policy, in view of its concerns about inflation. With overall growth moderate, inflation now likely to be close to target and confidence subdued outside the resources sector, the Board concluded that a more neutral stance of monetary policy would now be consistent with achieving sustainable growth and 2–3 per cent inflation over time.

Source: http://www.rba.gov.au/media-releases/2011/mr-11-24.html

Cheers,
Rashesh Bhavsar
Financial Planner

Fortune Wealth Creation Group
Ground Floor, 566 St. Kilda Road,
Melbourne VIC 3004

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Investment in Gold: Is it a good time to invest in Gold now?

2011-10-25T10:09:00.006+11:00

In March 2008, the gold price exceeded US$1,000,achieving a nominal high of US$1,004.38. In real terms, actual value was still well below the US$599 peak in 1981 (equivalent to $1417 in U.S. 2008 dollar value).

Performance History: On August 22, 2011 gold reached a new record high of $1908.00 at the London Gold Fixing but it is still well below the 1981 CPI adjusted price of $2,395 in today's dollars. It means it even has not returned the rate of return to match inflation. Gold was also in major downtrend from 1981 to 2000 for 20 years!

Gold is now in strong uptrend from 2000 but the question is who knows that history is not going to be repeated and we may be close to change in the trend! Please don't take me wrong. I am not telling you that Gold is bad investment but just want you to urge to have some precaution when you buy a gold. Remember, everything goes down which goes up.

I can still remember the greatest quote of Warren Buffet: Be greedy when everyone is fearful and be fearful when everyone is greedy. Today, everyone is talking about buying Gold!

Cheers,
Rashesh Bhavsar
Financial Planner Melbourne
566 St. Kilda Road, Melbourne.

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Source: http://en.wikipedia.org/wiki/Gold_as_an_investment

Victorian homeowners' $300m blow

2011-10-11T11:33:00.000+11:00

VICTORIAN homeowners have lost more than $290 million over the past three years selling properties for less than what they paid for them.

Alarming figures that point to a hidden crisis in the property market reveal 5427 vendors lost an average of $54,000 on investments gone wrong in the three years to July.
The Melbourne CBD, Southbank and Docklands are the state's leading loss-making suburbs.
One out of every 20 properties sold in those locations had lost their owner money, according to the data from a property research firm.
But the losses are not limited to the flats-dominated inner-city market, with the figures also showing vendors losing millions in popular family areas.
These suburbs include Point Cook, Roxburgh Park, Frankston, Reservoir, Carrum Downs, Glen Waverley, Hawthorn and Elwood.
Residex, a property information firm that collates data on real estate markets throughout Australia, compiled its analysis after sifting through the results of 268,000 sales recorded with the Valuer General.
It is the first time the firm has crunched the numbers on Victoria, meaning it could not make historical comparisons.
The losses are even more startling given that the city's median house price rose by around 30 per cent over the same period.
A breakdown of the top 10 loss-making suburbs is heavy with inner-city locations as well as some of Melbourne's most expensive postcodes.
At the top of the list is the CBD, where 427 properties were sold for less than what the vendor paid.

Southbank recorded 213 loss-making sales, Docklands 92, St Kilda 92, Carlton 91, Hawthorn 85, South Yarra 70, Brighton 61, Elwood 61 and Point Cook 57.

The figures come as Melbourne limps into its traditional spring selling period, with little more than half of all properties selling at auction.

The market has been battered by seven interest rate rises since April 2009, which have added about $85 a week to a $350,000 mortgage.

Yesterday, almost 600 properties were auctioned, but only achieved a clearance rate of 54 per cent.

Residex chief executive John Edwards said the number of vendors burned in property sales would eclipse 6000 if stamp duty and transaction costs were taken into account.

Mr Edwards, who has monitored the nation's property market for 25 years, said the pain for Melbourne home owners was far from over.

By the time the market bottoms at the end of next year, Residex expects the city's median house price to have shed 15 per cent. Families living in a $500,000 home can expect to see $75,000 wiped from its value.

"The adjustment process in Melbourne is just beginning," Mr Edwards said.

"I won't be surprised to see Melbourne suffer more than any other capital city in Australia. It has got the highest volume of surplus stock in the country and as the manufacturing industry further turns down the city will suffer from more unemployment than any other capital."

JPP Buyer Advocates' Catherine Cashmore said many of those who had lost money in property purchases would have been short-term investors, both local and foreign, buying off-the-plan, inner-city apartments.

"There is a surplus of high-rise developments and they tend to lose value before they gain value," she said. "Nine times out of 10, off-the-plan developments are overpriced. They are priced on speculative value.

"When you go to sell you are also in a situation where no one wants to buy your lived-in apartment because there are always brand new ones coming on to the market in those postcodes."

About 55 per cent of houses in Melbourne are now worth double what their owners paid, RP Data found. Interest-rate watchers are predicting a Melbourne Cup day interest-rate cut of 0.25 per cent by the Reserve Bank.

AMP Capital chief economist Shane Oliver said while homeowners will welcome the cut, it will take several more to inject any life into the state's property market.

"We will need a few more cuts before housing picks up," Oliver said.

Ref: http://www.heraldsun.com.au/news/more-news/home-owners-300-blow/story-fn7x8me2-1226162101573

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First home buyers set to benefit from housing slump

2011-09-13T08:50:00.000+10:00

Financial comparison website RateCity.com.au found that first home buyers face a tougher environment than last year, with the release of its second First Home Buyer Index.
But despite these concerns, the RateCity report shows property prices were relatively stable over the past 12 months and some states are lower. The national average house price for instance, (based on the RP Data-Rismark Hedonic Index using the capital cities data) fell by 0.15 percent to about $491,000.
"Interest rates have been on hold since November 2010, and recent Reserve Bank comments suggest relatively slow rate movements for the rest of 2011," says Mr Smith.
"We believe this is a very good time for potential first home buyers who are confident about their employment prospects and have a solid track record of building savings, and can therefore meet repayments with confidence."
RP Data's research director, Tim Lawless agreed.
"With household incomes growing at 6 percent per snnum, interest rates potentiall approaching the peak of the tightening cycle, rents increasing, and house values going nowhere, buyers are seeing an improvement in their position," he said.
"With first time buyers now representing a bit less than 15 percnet of all owner occupier housing finance commitments it is likely that market activity in the first-time buyer market will increase in the medium term."
The RateCity Index measures the level of difficulty for first home buyers entering the property market. It compares household incomes, first home buyer mortgage sizes, the benchmark basic variable rate – which is the average of the four major banks including ANZ, Commonwealth Bank, National Australia Bank and Westpac – monthly repayments and percentage of income towards repayments.
Currently first home buyers are facing tougher challenges than 12 months ago, with the RateCity Index lifting by nine points since February 2010 to reach 120 points in February 2011.
Damian Smith, RateCity’s CEO, said the biggest factor contributing to this change was interest rates.
"There’s no doubt that first home buyers are nervous about their chances of getting a foothold in the property market. We’ve seen the benchmark basic variable rate lift by 115 basis points in the past year to 7.17 percent. Also, lower government grants for first home owners, plus general consumer uncertainty are hanging over the market," says Mr Smith.
"The average first home buyer is paying around $164 more per month in mortgage repayments compared to 12 months ago, which has a big impact on the family budget.
"As a result, the level of activity from first home buyers is historically low. Compared to 12 months ago, the proportion of first home buyers out of all home loans financed has fallen by 3.7 percentage points to 14.9 percent."

Source: http://finance.ninemsn.com.au/pfproperty/buying/8242582/first-home-buyers-set-to-benefit-from-housing-slump

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