The Albanese government has been praised for taking the first step towards budget repair by banking its unexpected commodities windfall, with serious tax reform likely to be addressed in future budgets.
With government debt expected to hit the trillion dollar mark in the next financial year and the debt interest bill the fastest-growing area of government expenditure, the treasurer is under pressure to improve the budget bottom line.
Crypto scam alert: How to avoid the latest investment scam
Think you have been scammed?
Do not send any more money.
Report it to your financial institution. If you are not happy with your financial institution’s response, you can make a complaint to the Australian Financial Complaints Authority and seek an award compensation for damages.
Be wary of secondary scams or money recovery services that may offer to help you get your money back for a fee.
Contact IDCARE, a free government-funded service, which can help to develop a specific response plan. IDCARE will never contact you out of the blue.
Report the scam to the Australian Competition & Consumer Commission at Scamwatch and to the Australian Cyber Security Centre at ReportCyber.
Report to ASIC if you notice ASIC’s logo, references to Moneysmart or ASIC staff on a company’s promotional materials. Include a link to the website or a screenshot. Your report may disrupt the scammers and hopefully will warn others to avoid it. Unfortunately, ASIC cannot help you get your money back.
The attached note takes a look at the ongoing volatility in share markets and key things for investors to keep in mind. The key points are as follows:
Share markets remain volatile and at risk of further falls reflecting worries about inflation, aggressive central bank rate hikes, the war in Ukraine and recession fears.
Seven key things for investors to bear in mind are that: share market falls are normal, but the key is to make the most of compound interest; selling shares after a fall locks in a loss; trying to time investment market moves is hard; share pullbacks provide opportunities for investors to buy them more cheaply; Australian shares still offer an attractive income flow; shares invariably bottom with maximum bearishness; and finally, to avoid getting thrown off a long-term investment strategy it’s best to turn down the noise.
If your personal information falls into the wrong hands, it can be used to steal your identity.
If you've been affected by the recent Optus data breach, the Office of the Australian Information Commissioner has information on how to respond to a data breach.
The ACCC's Scamwatch has released information on the latest scams arising from the breach.
It's important to:
report the breach to your bank and super fund
change your passwords
be on the lookout for suspicious emails, phone calls, texts or messages through social media
keep close watch on your bank account for any unauthorised transactions
request a temporary ban on your credit report to ensure no unauthorised loans or applications
It's devastating when a natural disaster destroys or damages your home. Finding out you don't have enough insurance can add to your distress.
Understanding what events and damage are covered by insurance can help you get the right cover for your home.
Knowing if you live in a disaster-prone area can give you a better understanding of your risk. This helps you choose coverage for the events that are most likely to happen to your home.
Read full article
The attached note takes a look at the RBA's latest interest rate decision and why it made sense to slow down the pace of rate hikes. The key points are as follows:
The RBA sensibly dropped back to a 0.25% hike this month taking the cash rate to 2.6%. Its still signalling more hikes ahead though.
Slowing the pace of rate hikes makes sense: the RBA needs to allow time to assess the impact of rate hikes so far given that they impact with a lag; many households will see a sharp rise in mortgage payments which will depress spending through next year; global inflationary pressures are easing; inflation pressures are less in Australia than elsewhere; and there is now a high risk of global recession which will impact Australia.
Just because the Fed is prepared to run a high risk of recession does not mean the RBA should too. The Fed has an unfortunate track record of continuing to hike until there is a crisis.
We still see the cash rate peaking at 2.85%, but acknowledge upside risk to 3.1%. By late next year the RBA is likely to be cutting interest rates.
The attached note takes a look at the impact of investor psychology. The key points are as follows:
Investment markets are driven by more than just fundamentals. Investor psychology plays a huge role and helps explain why asset prices go through periodic booms and busts.
The key for investors is to be aware of the role of investor psychology and its influence on their own thinking. The best defence is to be aware of past market cycles (so nothing comes as a surprise) and to avoid being sucked into booms and spat out during busts. If an investor is looking to trade they should do so on a contrarian basis. This means accumulating when the crowd is panicking, lightening off when it is euphoric.
The attached note takes a look at seven charts we see as critical for the investment outlook. The key points are as follows:
While we are optimistic on a 12-month horizon, shares remain at high risk of further falls and a re-test of their June lows in the short term given hawkish central banks (including the RBA), heightened recession risks and geopolitical risks.
Seven key global charts worth keeping an eye on by investors in assessing the investment outlook are: global business conditions PMIs; US inflation and our Pipeline Inflation Indicator; unemployment & underemployment; inflation expectations; earnings revisions; the gap between earnings yields and bond yields; and the US dollar.
The attached note looks at the challenge posed by Australia's slowdown in productivity growth which is attracting more discussion lately given falling real wages and the Jobs and Skills Summit. The key points are as follows:
The last twenty years have seen a sharp slowdown in productivity growth in Australia from over 2% pa in the 1990s to around 1.2% pa over the last decade.
This has adversely affected growth in living standards and real wages. It will adversely affect asset class returns if allowed to persist.
Policies to boost productivity growth include: labour market reforms; more skills training; ongoing high levels of well targetted infrastructure spending; increased housing supply; competition reforms; measures to boost innovation; climate policy certainty; deregulation; and tax reform.
Contrary to popular belief, retirement is not only about rest or relaxation. After all, your interests and objectives in life could change. The goals you have today could be very different from those you have in mind for retirement in a few years.
Besides, during retirement, you get to set the rules and change them as you see fit. It’s also time to pursue bigger dreams, especially since Australians are living longer and have more time on their hands.
For tips about the best retirement activities, consider the following and discover just how wide and varied your options could be. Find them here!
A peak in inflation (in annual terms) has likely been reached in the US while Australia is lagging behind and is likely to see a peak in December 2022. Extremely high European energy prices means Euro inflation will increase further and may not peak until 2023.
But, inflation is unlikely to be headed back to its pre-Covid levels of ~2% per annum or less and we expect it to remain “sticky” in 2023 around 3-4% in the US and Australia which means central banks are not done with rate hikes.
Read full article here.
The attached note takes a look at the housing downturn and the outlook for home prices. The key points are as follows:
Australian home prices fell another 1.6% in August and are now down by 3.5% from their high, based on CoreLogic data.
Rising mortgage rates are the main driver and there is likely more to go. We continue to expect a 15-20% top to bottom fall in home prices out to the second half of next year, followed by a gradual recovery.
There are three reasons why this home price downturn will likely be deeper and the recovery slower than in past cycles: higher home price to income levels; higher debt levels; and an end to the long-term decline in interest rates.
Full article here
Markets have moved with such speed and velocity in both directions since the beginning of the COVID outbreak it has been difficult for investors to adjust with so much conflicting information being circulated.
Decades of data, however, shows that staying invested through volatile times has been a smart long-term strategy.
There are three main reasons why you should avoid the impulse to hit the sell button.
Read through the full article here.
Over the past 25 years, global investors have become conditioned to the notion that central banks will bail out global asset markets amid the first sign of stress. Many of these occurrences have been when the economy has been firmly in expansion territory such as 1998 when the Russian default crisis and the collapse of LTCM saw the Fed cut rates during one of the biggest economic and speculative equity booms in recorded history. Twenty years (and a few months) later, the Fed was completing one of its slowest tightening cycles ever and decided to go on hold in early 2019 because the US equity market had declined -20% in Q4’18, and then they cut rates in September 2019 when US unemployment was at a fresh 50-yr low of 3.5%, which sparked a huge gain in the S&P 500, despite zero earnings growth.
Although there are numerous other examples of the Fed, in particular, bailing out markets in the past quarter century, all of these policy pivots were possible as their preferred inflation gauge, the core PCE, was close to the +2% target. In 2022, investors have once again formed an expectation that the Fed could pivot on policy and be easing rates as lower commodity prices means financial conditions may not need to tighten as much as previously thought to get core inflation back to 2%. This is a challenging notion as reducing inflation from 6% to 4% will be much easier, than from 4% to 2% without a recession.
In this paper, we examine more closely, why the market may be over-estimating the Fed's optionality.
Click here to view the full paper
The attached note takes a look at investment cycles - what drives them and why investors need to allow for them. The key points are as follows:
Cyclical fluctuations are a key aspect of investment markets. Most are driven by economic developments but are magnified by swings in investor sentiment.
Of particular importance are the long-term cycles which are often driven by waves of innovation and the 3-5 year business cycle. Right now, we are still in the downswing phase of the business cycle and may have entered a weaker and constrained phase of the long-term cycle.
Periods of poor returns invariably give way to periods of great returns and vice versa. The key for investors is to not get thrown off by cyclical fluctuations.
Click here to read more.
Investment markets are driven by more than just fundamentals. Investor psychology plays a huge role and helps explain why asset prices go through periodic booms and busts.
The key for investors is to be aware of the role of investor psychology and its influence on their own thinking. The best defence is to be aware of past market cycles (so nothing comes as a surprise) and to avoid being sucked into booms and spat out during busts. If an investor is looking to trade they should do so on a contrarian basis. This means accumulating when the crowd is panicking, lightening off when it is euphoric.
Click here for the full article.
As well as enjoying the benefits of self-employment, you'll need to take care with money matters. Find out how to make the right start here.
Having a plan will help you feel more prepared if your living expenses increase. Click the link here to read more on the practical steps to help you manage living costs and keep on top of bills and to check on support and services available if you're feeling overwhelmed.
Bonds can provide a stable source of income and can protect the money you invest. They are considered less risky than growth assets like shares and property, and can help to diversify your investment portfolio.
Click here to read full article.