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When it comes to life stages, we’re all different. Some of us are all set up with a mortgage, a steady career and possibly even kids in our mid-20s, while others are footloose and fancy-free well into our 30s. Some of us are fortunate enough to have a bit of spare cash to put into super or other investments in our 40s, while others are focusing more on paying the bills and putting food on the table. And some of us enter our 60s with the kids long gone and the home loan paid off, while others still have a bit of a way to go before we can really put our feet up in retirement. So it can be difficult to generalise. But AMP’s 2022 Financial Wellness report says that most working Australians fit one of seven profiles when it comes to their personal finances. Younger Australians just starting out in their careers are more likely to be in a state of disinterested bliss, as finances take a back seat to other priorities – after all, life’s for living! A bit later on in life, with a mortgage and potentially kids, more of us are security strivers or guilty risk-takers. Then nearer retirement we tend to be more cautious spenders or – if we’re lucky – confidently affluent. Getting to grips with your finances Whatever stage you’re at in life, there are things you can be doing to get on top of your finances and put yourself on track to create your tomorrow. In your 20s you should probably… Start budgeting and managing your cashflow – the right spending choices now can set you up for life. Pay off bad debt Fast track credit card and personal loan repayments. Start a regular investment plan Keep disciplined using direct debit and re-invest your earnings. Kick start your super Find out if you can get a Government bonus of up to $500 a year. Consider bringing your money together in one account. Consider a more aggressive investment mix – you’re in for the long haul. In your 30s you should probably… Pay off bad debt Fast track credit card and personal loan repayments. Consider consolidating your debts/super fund/account/bank accounts. Start a regular investment plan Keep disciplined using direct debit and reinvest your earnings. Get financial advice on borrowing money to invest for the potential to magnify your returns. Take out adequate insurance – life cover, disability and income protection. Be smart with super Consider bringing your money together into one account. Consider a more aggressive investment mix, or one that suits your risk profile more closely. Put in extra for you and your spouse Find out if you can get a Government bonus of up to $500 a year. Create a will In your 40s you should probably… Pay off bad debt Fast track credit card and personal loan repayments Consider consolidating your debts/ super fund/accounts/bank accounts. Start a regular investment plan Keep disciplined using direct debit and re-invest your earnings. Get financial advice on borrowing money to invest to potentially increase your returns. Check your insurance and who it will be paid to. Be smart with super Consider getting money together into one account Consider a more aggressive investment mix, you still have a long term investment horizon Put in extra for you and your spouse Find out if you can get a Government bonus of up to $500 a year. Review your will for your changing circumstances. In your 50s you should probably… Get financial advice on how to pump up your super savings as you approach retirement. Review your risk profile and make sure your investments still suit. Get financial advice on borrowing money to invest to potentially increase your returns. Check your insurance and who it will be paid to. Review your will for your changing circumstances. When you reach 57 you should probably… Take advantage of higher limits for concessional super contributions. Get financial advice on accessing your super to consider: continue working to tax effectively boost your super reducing your work hours and accessing super to supplement your income delaying retirement until at least age 60 for tax-free access to super. Get financial advice to help you take advantage of government benefits. Review your will for your changing circumstances. And in your 60s you should probably… Revisit your budget Look at all the extra ways you can cut back on spending to give your finances a final boost. Consider the Government’s Work Bonus and if you want to earn a little extra income. Set up an emergency fund to cover any unplanned bills. Get financial advice on accessing your super Look at refreshing your arrangements each year to increase your income payments and contributions to further boost your super. Maximise Government benefits: by structuring your income and assets appropriately by opening an annuity. Accelerate your super savings, if you’re still working, consider Maximising your after-tax contributions while you’re still under 67. Contributing up to your tax-deductible limits. Making last-minute contributions. Making a downsizer contribution. How an annuity can give you guaranteed income for critical expenses. Release other wealth Consider downsizing strategies. Consider reverse equity for changing circumstances. Review your will for your changing circumstances. Ask the experts Deciding what changes to make to your finances isn’t always straightforward, so, if possible, speak to your financial adviser about the best options for you. It starts with super… When times are tough it’s understandable to focus on your day-to-day needs. After all, you need to put food on the table and keep paying the bills. But as probably your biggest asset after the family home, super is the cornerstone of your long-term finances. So it could pay to get on top of your retirement savings…and taking control in one area of your finances could make it easier to start getting to grips with more pressing challenges like budgeting and saving.   Source: AMP

When it comes to life stages, we’re all different. Some of us are all set up with a mortgage, a steady career and possibly even kids in our mid-20s, while others are footloose and fancy-free well into our 30s. Some of us are fortunate enough to have a bit of spare cash to put into super or other investments in our 40s, while others are focusing more on paying the bills and putting food on the table. And some of us enter our 60s with the kids long gone and the home loan paid off, while others still have a bit of a way to go before we can really put our feet up in retirement. So it can be difficult to generalise. But AMP’s 2022 Financial Wellness report says that most working Australians fit one of seven profiles when it comes to their personal finances. Younger Australians just starting out in their careers are more likely to be in a state of disinterested bliss, as finances take a back seat to other priorities – after all, life’s for living! A bit later on in life, with a mortgage and potentially kids, more of us are security strivers or guilty risk-takers. Then nearer retirement we tend to be more cautious spenders or – if we’re lucky – confidently affluent. Getting to grips with your finances Whatever stage you’re at in life, there are things you can be doing to get on top of your finances and put yourself on track to create your tomorrow. In your 20s you should probably… Start budgeting and managing your cashflow – the right spending choices now can set you up for life. Pay off bad debt Fast track credit card and personal loan repayments. Start a regular investment plan Keep disciplined using direct debit and re-invest your earnings. Kick start your super Find out if you can get a Government bonus of up to $500 a year. Consider bringing your money together in one account. Consider a more aggressive investment mix – you’re in for the long haul. In your 30s you should probably… Pay off bad debt Fast track credit card and personal loan repayments. Consider consolidating your debts/super fund/account/bank accounts. Start a regular investment plan Keep disciplined using direct debit and reinvest your earnings. Get financial advice on borrowing money to invest for the potential to magnify your returns. Take out adequate insurance – life cover, disability and income protection. Be smart with super Consider bringing your money together into one account. Consider a more aggressive investment mix, or one that suits your risk profile more closely. Put in extra for you and your spouse Find out if you can get a Government bonus of up to $500 a year. Create a will In your 40s you should probably… Pay off bad debt Fast track credit card and personal loan repayments Consider consolidating your debts/ super fund/accounts/bank accounts. Start a regular investment plan Keep disciplined using direct debit and re-invest your earnings. Get financial advice on borrowing money to invest to potentially increase your returns. Check your insurance and who it will be paid to. Be smart with super Consider getting money together into one account Consider a more aggressive investment mix, you still have a long term investment horizon Put in extra for you and your spouse Find out if you can get a Government bonus of up to $500 a year. Review your will for your changing circumstances. In your 50s you should probably… Get financial advice on how to pump up your super savings as you approach retirement. Review your risk profile and make sure your investments still suit. Get financial advice on borrowing money to invest to potentially increase your returns. Check your insurance and who it will be paid to. Review your will for your changing circumstances. When you reach 57 you should probably… Take advantage of higher limits for concessional super contributions. Get financial advice on accessing your super to consider: continue working to tax effectively boost your super reducing your work hours and accessing super to supplement your income delaying retirement until at least age 60 for tax-free access to super. Get financial advice to help you take advantage of government benefits. Review your will for your changing circumstances. And in your 60s you should probably… Revisit your budget Look at all the extra ways you can cut back on spending to give your finances a final boost. Consider the Government’s Work Bonus and if you want to earn a little extra income. Set up an emergency fund to cover any unplanned bills. Get financial advice on accessing your super Look at refreshing your arrangements each year to increase your income payments and contributions to further boost your super. Maximise Government benefits: by structuring your income and assets appropriately by opening an annuity. Accelerate your super savings, if you’re still working, consider Maximising your after-tax contributions while you’re still under 67. Contributing up to your tax-deductible limits. Making last-minute contributions. Making a downsizer contribution. How an annuity can give you guaranteed income for critical expenses. Release other wealth Consider downsizing strategies. Consider reverse equity for changing circumstances. Review your will for your changing circumstances. Ask the experts Deciding what changes to make to your finances isn’t always straightforward, so, if possible, speak to your financial adviser about the best options for you. It starts with super… When times are tough it’s understandable to focus on your day-to-day needs. After all, you need to put food on the table and keep paying the bills. But as probably your biggest asset after the family home, super is the cornerstone of your long-term finances. So it could pay to get on top of your retirement savings…and taking control in one area of your finances could make it easier to start getting to grips with more pressing challenges like budgeting and saving. Source: AMP

Wondering what responsible investing is all about? You may have heard about socially responsible investing – or possibly sustainable investing. Whatever the name, here’s what it means in practice. We spend a large part of our lifetime saving for retirement, with around 10 per cent of our pay packet heading straight for our superannuation fund. It’s little wonder then that we take a second glance at our super balance when the stock market takes an untimely dive. Yet it’s not our only concern these days. In addition to wanting a healthy balance, more and more of us are hoping that our hard-earned contributions are being put to good use – to address environmental concerns and support a better society. That’s where responsible investing comes in. Thanks to its holistic approach, many of us are well positioned to achieve both. Investing in the best of the best Responsible investing – also known as socially responsible, sustainable or ethical investing – takes into account a company’s financial performance as well as how it treats people, society and the environment. The underlying idea is that companies can generate a positive return for wider society as well as positive financial returns for an investor’s portfolio. How this is achieved in practice though can differ considerably. A case of avoidance The foundations of responsible investment lay in faith-based organisations who in the 19th century started to simply avoid investing in certain activities e.g. the Quakers and alcohol. Nowadays, it might be that an investor will exclude specific sectors from their investment portfolio that they consider unethical or otherwise misaligned with their values. This is otherwise known as applying a negative screen. At the same time, investors may wish to gain exposure to a specific sector if it upholds their particular values or ethics. The use of positive screens therefore ensures an investor’s portfolio has an exposure to business which is aligned to their values such as renewable energy or specific social benefits. While this may be problematic for superannuation funds to carry out given the diversity of their members, there’s an opportunity to tilt portfolios towards certain socially accepted principles. For instance, more and more funds are looking to include environmentally friendly companies in their investment portfolios in recognition of society’s growing concern around climate change. Incorporating ESG A more common practice is for investors to formally incorporate consideration of Environmental, Social and Governance factors into their investment decision making. For example, a company may be assessed on a whole swag of environmental issues, such as its carbon emissions and the degree to which it’s polluting the air or degrading the land. Then there are the social issues to consider. Among other things, these include the company’s working conditions and how committed it is to supporting its local community and customers. A company will also be judged on its corporate governance – essentially, how well the company is managed. This looks at factors like the diversity of the company’s board members, how much it pays its senior executives (and whether it’s justified) plus, very importantly, how transparent it is as a company. The idea is that identifying when these factors are materially important to the business, both as a risk or an opportunity enhances the investment decision. This can both help protect against risks such as unsustainable business models and also identify opportunities to invest in companies that have great business opportunities in solving problems. Ultimately this can result in both enhanced investment returns and more holistic outcomes. Getting active Another approach to responsible investing is known as active ownership or stewardship. One of the key pillars of the United Nations’-backed PRI (principles of responsible investing), it focuses on investors addressing any perceived failings in how a business is managed, whether through direct engagement with its Board of Directors, proxy voting, or other external advocacy. Direct engagement is where investors sit down with the company’s management and voice their concerns. MLC, for example, was one of a number of investors that approached Meta’s Facebook in 2021 about its newsfeed algorithm. There was concern that it was configured in a way that meant individuals were only four or five clicks away from violent content – or (in the case of Instagram) just a few clicks away from impossibly perfect lives that were detrimental to teenagers’ mental wellbeing. As a result of investor pressure, the company put 200 programmers on to reconfigure the algorithm and now releases a quarterly incidents report that monitors how much inappropriate content is picked up and banned before it goes viral. In a clear win, the number of such incidents has jumped from 12 million to 20 million a year.  Next steps Super funds will usually adopt a variety of approaches to responsible investing. So, if you have a lifetime of savings in super, it’s a good idea to understand the approach your particular fund takes.       Source: IOOF

What does climate change mean for your super balance? It’s impossible to ignore the issue of climate change in 2022. And certainly, if you’re invested in the markets, you wouldn’t want to. One reason to pay close attention could be that you hope to invest in line with your beliefs and values, supporting those carbon-reduction and environmentally sustainable practices and solutions that will help make the world a better place for your children and grandchildren. But there’s another reason – one that holds weight from a purely financial perspective. The fact is, rising temperatures, climate-related policies and new technologies are presenting financial risks and financial opportunities. And while some are in the more distant future – such as the fate of ski resorts in a warmer world – others are nearly upon us. Think of the implications of Europe’s ban on new petrol and diesel cars by 2035. Or the rise in drought-tolerant crops in Australia. Avoiding risk and embracing opportunity are critical to the long-term health of your investment portfolio, and also to your super balance. Physical investment risk explained There are two kinds of investment risk when it comes to climate change. The first is the physical risk – the impact more frequent severe weather events can have on businesses and the economy at large. Beyond their capacity for physical destruction, fires and floods can disrupt a company’s vital supply chains. For example, many businesses in the Hawkesbury region of NSW ground to a temporary halt this year, cut off from transport links once more as the Windsor Bridge in Western Sydney was again blocked by flood waters. On a larger scale, the global pandemic has demonstrated just how vulnerable many international businesses are to an unexpected pause in essential supplies. That’s why it’s important for investors to consider the individual companies, whole sectors and entire countries that have the fortitude and adaptability to sidestep such issues – to survive and even thrive. Take Australia’s agricultural industry. There you will find farmers who have leased part of their land to a solar farm, their sheep grazing among the solar panels. On top of providing an alternative income, this approach is also increasing the quality of wool, according to early results. Transition investment risk explained The second kind of climate risk is known as ‘transition risk’. Perhaps more concerning in the short-term, it’s associated with transitioning to renewable forms of energy. This is becoming ever more relevant as many countries, including Australia, sign up to a net-zero emissions target by 2050. With this target just three decades away, the UN-supported Principles for Responsible Investment state that meeting it will require an immediate cessation of new gas and oil exploration, a rapid adoption of renewable energy and a huge shift in production methods and consumption patterns. That’s going to impact a lot of businesses, resulting in some clear winners and losers. For an investor, it will be a matter of assessing the likelihood of a company with an old business model becoming rapidly irrelevant or the very real risk of having stranded assets within an investment portfolio. Those that are wholly dependent on fossil fuels are clearly vulnerable – mining and electric utility companies being notable examples. But businesses and even sectors that are indirectly affected might also be left behind, including those that supply parts and services to these businesses. On the upside, any sector that is part of the large-scale deployment of enabling technologies, materials and services will be well placed to benefit from the rapid change to net zero. So too will be companies that take the lead in adapting to a carbon-constrained economy. Investing in the future In a world that’s rapidly shifting and adapting, there’s no doubt that the power of many will play a huge and vital role in our future success – both as investors and individuals.   Source: IOOF

Scams robbed Australians of more than $2 billion last year Australians lost a record amount of more than $2 billion to scams in 2021, despite government, law enforcement, and the private sector disrupting more scam activity than ever before, the ACCC’s latest Targeting Scams report reveals. The report compiles data from Scamwatch, ReportCyber, major banks and money remitters, and other government agencies, and is based on analysis of more than 560,000 reports. Reported losses to all organisations totalled almost $1.8 billion, but as one-third of victims do not report scams the ACCC estimates actual losses were well over $2 billion. Investment scams were the highest loss category ($701 million) in 2021, followed by payment redirection scams ($227 million), and romance scams ($142 million). “Scam activity continues to increase, and last year a record number of Australians lost a record amount of money,” ACCC Deputy Chair Delia Rickard said. “Scammers are the most opportunistic of all criminals: they pose as charities after a natural disaster, health departments during a pandemic, and love interests every day.” “The true cost of scams is more than a dollar figure as they also cause serious emotional harm to individuals, families, and businesses,” Ms Rickard said.  Based on reports to Scamwatch in 2021, women reported the most scams but men lost more money than women, and men’s losses to investment scams were double women’s losses. In culturally and linguistically diverse communities, women had slightly higher losses than men. People aged 65 and over reported the highest losses, and reported losses steadily increased with age. In 2021, Scamwatch received record levels of reports and losses from Australians that may have been experiencing vulnerability or hardship. People with disability made twice as many reports compared to 2020, and their financial losses increased by 102 per cent to $19.6 million. The number of reports by Indigenous Australians increased by 43 per cent between 2020 and 2021, and reported losses increased by 142 per cent. People from culturally and linguistically diverse communities experienced an 88 per cent increase in losses last year compared to 2020. “The increasing number of reports by people experiencing vulnerability is a very worrying trend. Everyone from government, to banks, and digital platforms needs to do more to address this,” Ms Rickard said. “The ACCC is particularly wanting banks to match payee information in pay anyone transactions. This has been shown to have a real impact in countries that have done so.” ACCC research presented in the report shows that scams are almost ubiquitous in Australia today. Ninety-six per cent of respondents had been exposed to scammers in the previous five years, and 20 per cent had fallen victim. Of those who lost money, 56 per cent were unable to recover any of it.   Source: ACCC Scamwatch

Reviewing your personal insurance policy: when, why and how Insurance works best when you have the right level of protection for your situation and as your life changes, so might your insurance needs. You should consider reviewing your cover whenever your situation changes, like: taking on a mortgage to buy a property having children getting married upsizing or downsizing your home getting a pay rise or take a pay cut starting a business experiencing a change in your health or lifestyle paying off your mortgage stopping supporting financially dependent children joining a new super fund that may provide automatic insurance cover These milestones mark important times to review your insurance, including the amount of cover you have and whether your beneficiaries (those who will receive your insurance in the event of your death) are up to date. How to review your insurance: Step 1: Read your insurance contract Refer to your product disclosure statement (PDS) and read it to fully understand what you’re covered for (death, disability or injury for instance) and compare this against what you’d ideally like to be covered for. Step 2: Check the insurance policy expiry date Check if your insurance policy has an expiry date, and if so, make note of when it is so you’re not caught off guard. It can be a good idea to set yourself a reminder a month or two before it’s due so you can contact your insurance provider ahead of time. Step 3: Know your beneficiaries An insurance beneficiary is the person, or people, who will receive your insurance payout in the event of your death. It’s important to make sure your beneficiaries are up to date so your money ends up in the right hands. Step 4: Check if you have enough insurance To help you work out the right level of insurance cover consider the following questions. How much money would your family have if you were to pass away or become disabled? Consider the amount of money you have in super, savings, shares and other assets, and existing insurance policies as a starting point. How much money would your family need if you were to pass away or become disabled? Consider the size of your mortgage and any other debts you have, as well as other costs such as childcare, education and day-to-day expenses you may be covering. The difference between these figures should provide some guidance on the amount of insurance cover you may want to have. However, you might need to compromise between what you’d like and can afford. Step 5: See if you have any other insurance policies Like many Australians, you may have insurance through super. So, it’s a good idea to check this against other policies you might have outside super. Then compare your cover, check whether you have any insurance double ups – if you have more than one super account with the same type of insurance, you may be paying for more insurance than you need. Something to note on your TSC (temporary salary continuance) insurance, you’ll most likely only be able to claim up to 75% of your pre-disability income, regardless of whether you have TSC cover within multiple super accounts. Step 6: Compare insurance providers If you’re not sure whether you’re getting the best deal, you might want to compare providers. Remember, there are other considerations to take into account aside from reduced premiums, such as what level of cover you get, any exclusions (like the treatment of pre-existing medical conditions) and waiting periods. Also keep in mind if you do cancel your insurance, you might lose access to features and benefits, and you might not be able to sign back up at the same rate or with the same level of ease. It’s also important to disclose your situation to your insurer honestly, or the policy might be invalid if you do need to make a claim. Step 7: Reduce or manage your insurance premiums If affordability is a major concern, speak to your super provider or insurer depending on what type of insurance you hold, to find out how you can manage your premiums without losing your policy. You might be able to: reduce the amount you’re insured for change how often you make a payment (If you don’t hold insurance inside super) adjust your waiting and benefit periods. Source: AMP

Is it time to spring clean your finances? Springtime is a time of renewal, a chance to enjoy the sunshine and the opportunity to rejuvenate the garden. The same also applies to our finances. It’s a good idea to regularly review where your money is invested to ensure your portfolio remains relevant to your needs and expectations. Where your money was invested two or three years ago may no longer be appropriate to your needs, particularly if you have experienced a change in your life circumstances, such as a new job, new mortgage or perhaps you may be thinking of winding down with retirement in mind. In addition to life events, factors beyond our control such as rising interest rates and escalating inflation are placing great pressure on many households’ ability to meet the increasing costs of utilities, groceries and rent or mortgage repayments. When we take time to review our financial resources, outgoings and investments it can present opportunities we may not otherwise have identified. Opportunities that could save you money or lead to better investment returns in the future. It’s why we recommend at least an annual review of your financial circumstances and future outlook. And as we look forward to some warmer, sunnier weather there’s no better time to get started. Contact us today to find out how.

How interest rate rises could affect you With interest rates increasing for the first time in many years, its effects will be felt by all Australians, not just those paying off their homes. In this article we address how interest rate increases may affect you, depending on your circumstances, and possible ways to manage it. Super members and retirees Super members Interest rate rises can affect your super balance depending on how your retirement savings are being invested. As opposed to increasing like a bank account that’s paid a constant interest rate, the value of your super changes in line with the assets of the investment options in which your super is invested. So, it can go up and down. While this can be unsettling, it isn’t necessarily a cause for concern if you’re a long-term investor who’s still some years from retirement. From what we’ve seen in the past, share markets bounce back eventually. Making changes to how your super is invested based on short-term volatility may therefore increase the risk that your super balance fails to meet your retirement goals. Retirees As for retirees, if their retirement savings are invested in defensive assets – such as fixed interest and cash – they may see an improvement in their returns over the longer term. Homeowners and potential homeowners Homeowners Unfortunately for homeowners paying off a variable interest rate loan, they will see an increase in their mortgage repayments when interest rates rise. In an environment where interest rates look to be rising, you may want to consider fixing at least some portion of your mortgage. This may also give you a better handle on your finances each month to budget effectively for your other living expenses. Prospective buyers For people looking to get into the property market, the rate rises may provide greater opportunity as it often slows the growth of property prices. This is due to there being less demand and more supply. It may however, impact your borrowing capacity as you’ll need to show you can repay the loan based on the higher interest rate. Investors Shares   In terms of the impact on share markets, from what we’ve seen in the past, even if investors experience volatility in the short-term, markets eventually recover with time. Rate rises can therefore provide investors with more opportunity to buy while prices are low. Property Rising interest rates can slow down the property market by reducing demand. They can also reduce the borrowing capacity for investors and borrowers. Fixed interest investments For those holding fixed interest investments such as government and corporate bonds, interest rate increases may reduce the value of bonds. This is because the capital value of bonds generally fall as interest rates rise. Australian dollar When interest rates fall, the Australian dollar usually weakens making Australian commodities and exports more affordable for offshore buyers. But generally, when rates rise the Australian dollar strengthens. This is because overseas investors are attracted to a higher yield, driving up demand for Australian currency. Savers Interest rate rises are generally good news for people with savings or using savings to supplement another source of income such as a pension. Term deposits offer higher returns too and can help to reduce volatility in an investment portfolio as they’re less sensitive to interest rate changes. How you can prepare yourself for future rate increases When reviewing your finances, consider building a buffer for further rate increases that might affect your mortgage repayments. It may also be worth looking at consolidating your debts and renegotiating your current interest rates to protect yourself from future increases. When it comes to your super, see if you’re still happy with the investment options you’re invested in. If not, consider speaking with a financial adviser. Their job is to help you with every aspect of your financial lifesavings, insurance, tax, debt—while keeping you on track to achieve your goals.     Source: IOOF

Key points 2022 was dominated by high inflation, rising interest rates, war in Ukraine and recession fears. This hit bonds and shares hard, driving losses for balanced growth super funds. 2023 is likely to remain volatile and a retest of 2022 lows for shares is a high risk. But easing inflation, central banks getting off the brakes (with the RBA at or close to the peak on rates), economic growth likely stronger than feared and improved valuations should make for better returns. Australian residential property prices likely have more downside, ahead of a September quarter low. The main things to keep an eye on are inflation; central banks and interest rates; US politics; China tensions; and Australian residential property prices. 2022 – from COVID to inflation and surging interest rates The good news is that 2022 finally saw the world shake off the grip of Coronavirus as it transitioned from a pandemic to endemic (albeit it’s still causing problems in China). However, the past year turned out far more difficult for investors than might have been thought a year ago: Inflation, which already rose in 2021 surged to levels not seen for decades, largely reflecting pandemic related distortions to supply and reopening and a stimulus driven surge in demand and floods in Australia. Russia invaded Ukraine, leading to a surge in energy and food prices. Central banks moved to aggressively withdraw monetary stimulus and raised interest rates at the fastest pace seen in decades to deal with inflation and rising inflation expectations. Bond yields surged in response to the rise in inflation and interest rates. Chinese growth fell sharply, reflecting its zero-COVID policy and a continuing property downturn despite policy stimulus. Geopolitical tensions surged with war in Ukraine and worries about a Chinese invasion of Taiwan following President Xi Jinping’s power consolidation, although there were hopes of a thaw near year end. As a result of all this, investors increasingly fretted about recession. Tech stocks and crypto currencies, having been the biggest winners of the COVID lockdowns and easy money, were hit hard by reopening and monetary tightening, ultimately proving no hedge against inflation. Growth was still ok – but a lot weaker than expected Despite these problems, global GDP is still expected to have come in at around 3.2% which is weaker than the 5% or so growth expected a year ago and down from 6% in 2021; but still reasonable as reopening and stimulus helped. And in Australia, GDP is expected to have been around 3.5%, lower than expected a year ago and down from 4.8% in 2021, but still reasonable. The growth slowdown saw a slowdown in profits. But the main problem for investment markets was the rise in inflation, interest rates and bond yields. Investment returns for major asset classes Total return %, pre fees and tax 2021 actual 2022* actual 2023 forecast Global shares (in Aust dollars) 29.6 -7.4 4.0 Global shares (in local currency) 24.3 -11.9 7.0 Asian shares (in local currency) -6.8 -18.0 10.0 Emerging mkt shares (local currency) -0.2 -13.8 10.0 Australian shares 17.2 2.2 10.0 Global bonds (hedged into $A) -1.5 -11.1 3.0 Australian bonds -2.9 -7.8 4.0 Global real estate investment trusts 30.9 -23.0 9.0 Aust real estate investment trusts 26.1 -17.1 9.0 Unlisted non-res property, estimate 12.3 11.5 4.0 Unlisted infrastructure, estimate 12.0 10.0 5.0 Aust residential property, estimate 23.0 -7.0 -7.0 Cash 0.0 1.0 3.1 Avg balanced super fund, ex fees & tax 14.3 -3.0 6.3 *Year to date to Nov. Source: Thomson Reuters, Morningstar, REIA, AMP Global shares had a rough year with a plunge of 23% into October on inflation, interest rate and recession worries, before a rally cut losses. Chinese shares led the weakness, not helped by its zero COVID policy, followed by Asian shares, given their exposure to China and cyclical sensitivity. US shares also underperformed reflecting its high-tech exposure and aggressive Fed tightening. Australian shares outperformed, helped by strong commodity prices and a relatively less hawkish RBA. Government bonds slumped as yields surged on high inflation and rate hikes. Australian bonds had their worst year since 1973 or the 1930s. Real estate investment trusts fell with the surge in bond yields. Unlisted property and infrastructure returns remained strong, being less sensitive to short-term share market and bond yield moves. Home prices fell sharply reflecting poor affordability after a boom and, particularly, as mortgage rates rose, reducing home buyer capacity. Cash and bank term deposit returns improved but were still low. The $A fell with share markets on growth concerns and relatively aggressive Fed rate hikes into October, before a partial recovery. Balanced super funds had negative returns reflecting poor share and bond returns. This followed very strong returns in 2021. 2023 – lower inflation and lower growth First the bad news: inflation is still way too high at around 7 to 11% in many advanced countries; tight labour markets risk wage-price spirals; central banks are still warning of more rate hikes; the risk of recession is high with inverted yield curves and weak confidence largely in response to rate hikes; the US has returned to divided Government with the risk of debt ceiling and funding standoffs; war continues in Ukraine; and tensions remain with China and Iran. Even Covid continues to disrupt – but mainly in China as cases surge as it reopens. These all suggest another volatile year and possibly continuation of the bear market in global shares. PMIs are surveys of business confidence and conditions. Source: Bloomberg, IMF, AMP However, there is reason for optimism. First, inflationary pressures may have peaked and are slowing rapidly (as reflected in our Pipeline Inflation Indicator): supply chain pressures have eased; demand is cooling; and labour markets are showing signs of topping out. In fact, it may only require a slight pull back in demand (to push capacity utilisation back down to normal and unemployment above the NAIRU – or non-accelerating inflation rate of unemployment, with the return of immigration helping in Australia) to … Read more

If you’re a first home buyer, you may be eligible to withdraw voluntary super contributions you’ve made (plus earnings) to put towards a home deposit. Through the First Home Super Saver Scheme (FHSSS), first-home buyers may be able to use Australia’s superannuation system as a tax-effective way to save for part of their home deposit. How does it work? If you’re aged 18 or over and are an eligible first home buyer (which broadly means that you’ve never owned any Australian property before), you can withdraw voluntary super contributions which you’ve made since 1 July 2017 to put towards a home deposit. There’s more on eligibility criteria below. Under the FHSSS, first home buyers, who have made voluntary super contributions of up to $15,000 per financial year into their super, can withdraw these amounts (plus associated earnings/less tax) from their super fund to help with a deposit on their first home. If you’re eligible, the maximum amount of contributions that can be withdrawn under the scheme is broadly $50,000 for individuals. What counts as a voluntary super contribution? Voluntary super contributions don’t include the compulsory super guarantee contributions your employer is required to make into your super fund, if you’re eligible. Spouse contributions (which are those that your partner may choose to put into your super fund) also can’t be withdrawn under the scheme. Voluntary contributions that can be withdrawn include: Salary sacrifice contributions These are contributions you can get your employer to pay you out of your before-tax income if you choose to, which are on top of what your employer might pay you under the super guarantee, if you’re eligible. Tax-deductible super contributions These are contributions you can make (such as when you transfer funds from your bank account into your super) that you then claim a tax deduction for. Personal super contributions These are contributions which you can also make by transferring funds from your bank account into super, but which you don’t claim a tax deduction for. How does the scheme benefit first home buyers? Due to the favourable tax treatment, generally available through super, the FHSSS intends to help first home buyers to grow their deposit more quickly. When money is withdrawn under the FHSSS, amounts that were contributed as before-tax or tax-deductible contributions are taxed at your marginal tax rate, less a 30% tax offset, while amounts that are contributed as after-tax contributions aren’t subject to additional tax. Note, tax will also apply to the associated earnings. Meanwhile, it’s important to understand that the money you save through the scheme mightn’t be enough for a full deposit to buy your first home, but you could combine it with other methods of saving to potentially help you get there faster. How do I withdraw contributions under the scheme? To make a withdrawal under the scheme, an application to the Australian Taxation Office (ATO) will be required, and an eligible person is only allowed one FHSSS withdrawal in their lifetime. What else should I be aware of? Before you can request a withdrawal, you must first get a ‘determination’ from the ATO using your myGov account. The determination tells you how much you can withdraw under the scheme. You can ask for as many determinations as you like but can make only one withdrawal request. You must buy residential premises. This includes vacant land (if you’re planning to build), but not any premises that can’t be occupied as a residence, and not a houseboat or motor home. You’ll need to buy a home or land to build on within 12 months of withdrawal. You can ask the ATO to extend this to 24 months if required. FHSSS amounts that are withdrawn and not subsequently used for a property purchase must be put back into super as after-tax contributions, or penalties will apply. The first-home buyer must live at the property for at least six months in the first 12-month period from when it can be occupied. The maximum amount you can withdraw under the scheme is $50,000 (plus earnings). There are also annual contributions caps in place you should be aware of. Additional rules may apply to your situation, so make sure you do your research before making any decisions.   Source: AMP