Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, August 2020

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Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, August 2020

At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.

The global economy is experiencing a severe contraction as countries seek to contain the coronavirus. Even though the worst of this contraction has now passed, the outlook remains highly uncertain. The recovery is expected to be only gradual and its shape is dependent on containment of the virus. While infection rates have declined in some countries, they are still very high and rising in others. International trade remains weak, although there has been a strong recovery in industrial activity in China over recent months.

Globally, conditions in financial markets remain accommodative. Volatility has declined and there have been large raisings of both debt and equity. The prices of many assets have risen substantially despite the high level of uncertainty about the economic outlook. Bond yields remain at historically low levels.

The Bank's mid-March package of support for the Australian economy is working as expected. There is a very high level of liquidity in the Australian financial system and borrowing rates are at historical lows. Authorised deposit-taking institutions are continuing to draw on the Term Funding Facility, with total drawings to date of around $29 billion. Further use of this facility is expected over coming months.

Government bond markets are functioning normally alongside a significant increase in issuance. The yield on 3-year Australian Government Securities (AGS) has been consistent with the target of around 25 basis points. The yield has, however, been a little higher than 25 basis points over recent weeks. Given this, tomorrow the Bank will purchase AGS in the secondary market to ensure that the yield on 3-year bonds remains consistent with the target. Further purchases will be undertaken as necessary. The yield target will remain in place until progress is being made towards the goals for full employment and inflation.

The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. As difficult as this is, the downturn is not as severe as earlier expected and a recovery is now underway in most of Australia. This recovery is, however, likely to be both uneven and bumpy, with the coronavirus outbreak in Victoria having a major effect on the Victorian economy. Given the uncertainties about the overall outlook, the Board considered a range of scenarios at its meeting. In the baseline scenario, output falls by 6 per cent over 2020 and then grows by 5 per cent over the following year. In this scenario, the unemployment rate rises to around 10 per cent later in 2020 due to further job losses in Victoria and more people elsewhere in Australia looking for jobs. Over the following couple of years, the unemployment rate is expected to decline gradually to around 7 per cent.

The Board also considered other scenarios. A stronger recovery is possible if progress is made in containing the virus in the near future. This progress would support an improvement in confidence and a less cautious approach by households and businesses to their spending. On the other hand, if Australia and other countries were to experience further widespread lockdowns, the recovery in both output and the labour market would be delayed. Details on these scenarios will be provided in the Statement on Monetary Policy on 7 August.

In each of the scenarios considered by the Board, inflation remains below 2 per cent over the next couple of years. In the most recent quarter, CPI inflation fell to –0.3 per cent in year-ended terms, reflecting lower oil prices and the effects of various policy measures, including the decisions to make child care and some pre-school free for a period. Inflation is expected to return to positive territory in the current quarter. Beyond that, given the ongoing spare capacity in the economy, inflation is expected to average between 1 and 1½ per cent over the next couple of years.

As Australians deal with the coronavirus, the economy is being supported by the substantial, coordinated and unprecedented easing of fiscal and monetary policy. The Australian Government's recent announcement that various income support measures will be extended is a welcome development and will support aggregate demand. It is likely that fiscal and monetary stimulus will be required for some time given the outlook for the economy and the labour market.

The Board is committed to do what it can to support jobs, incomes and businesses in Australia. Its actions are keeping funding costs low and assisting with the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.

Source: Reserve Bank of Australia, August 4th, 2020

Enquiries

Media and Communications
Secretary's Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Email: rbainfo@rba.gov.au

Source: MLC Economic Monthly update

Setting financial goals as a couple

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Setting financial goals as a couple

Tackling financial goals together can help a couple understand each other’s priorities, develop good saving and spending habits, as well as create the kind of future that works for you both.

STEP ONE: WHAT ARE YOUR FINANCIAL PAIN POINTS?

When you start making plans, chances are you’ll both come across financial pain points. In other words, the areas that need some attention and possible alterations. These might include:

  • Post-wedding or honeymoon debts.

  • Different earning capacities.

  • Different savings goals.

  • Different spending habits.

  • Disagreements you’ve had in the past.

  • Different ideas about couples bank accounts.

While it’s normal to have pain points like these, it’s important to recognise them for what they are and work on solutions.

Talking to a financial planner early on can help with this.  Please contact us on |PHONE|. Money isn’t the easiest subject to discuss, but somebody experienced in financial planning or advice for married couples may offer good ideas, such as how much to contribute in a joint savings account.

STEP TWO: SEPARATE INDIVIDUAL GOALS FROM COUPLE GOALS

While you’ll both have personal savings goals, it’s a good idea to talk about what these are and why they’re important to you.

This will help you work on them, without compromising the goals you have as a couple. Examples of couple goals include:

  • Buying a home together

  • Renovating your home

  • Buying an investment property

  • Travelling or moving overseas

STEP THREE: CREATE AN ACTION PLAN

With a better grip on your financial pain points and the goals you both want to achieve, it will be easier to start making practical plans.

Just like working with wedding planning list, setting out a clear timeline can help you visualise your goals, and importantly, make sure you’re staying realistic about how and when you’ll achieve them.

It could be worth talking to a financial planner contact us on |PHONE|. A professional can help you set up the timelines and look at ways of boosting your goals.

Keeping motivated is important, but this often takes incentive. You could set up a separate bank account, such as the NAB Reward Saver, that has good interest rates and bonuses. You might also want to consider a term deposit. These savings products offer fixed, competitive interest rates and you can choose a term to suit your needs.

When you hit your milestones, there’s no harm in rewarding yourself. A nice dinner or weekend away can remind you that your couple goals are worth achieving.

Using an online budget planner (perhaps the same one that helped with your wedding budget) will help you find out where you can save money, as well as how much. MoneySmart’s savings goals calculator is also a great tool to keep you on track.

For more budgeting and saving tips, NAB has plenty of tips and advice to give.

STEP FOUR: GET THINGS MOVING

You may have already opened up a savings account, but have you thought about applying for a personal loan?

With the right repayment plan in place, personal loans can help you achieve those bigger financial goals, such as paying for the costs of starting a family, moving overseas, or even paying off the engagement ring.

If you’re looking at property instead, it’s best to start the conversation with your lender soon, so you can figure out how much you can afford and where you want to live.

When you apply for a home loan, you’ll want to be prepared. Banks and lenders take into consideration a lot of factors before they decide to approve applications. But the more organised you are, the easier it will be to get things moving.

Source: Nab July 2020 

Reproduced with permission of National Australia Bank (‘NAB’). This article was original published at https://www.nab.com.au/personal/life-moments/family/get-married/budgeting-couple

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances.

© 2020 National Australia Bank Limited ("NAB"). All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

 

 

Source: MLC General article newsletter

How to construct an effective portfolio

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How to construct an effective portfolio

Portfolio construction is always a popular topic among investors, but as markets become more volatile, the practice of carefully piecing together a jigsaw of investments that weathers both good times and bad is particularly relevant.

Effective portfolio construction is essential to successful investing, but many investors struggle to understand the underlying concepts, much less put them into practice.

Fortunately, constructing an investment portfolio that suits your needs and delivers your goals is simpler than it sounds.

The first step to effective portfolio construction is simply knowing what you want to achieve.

Every portfolio has a purpose. It might be to fund your retirement or to provide an inheritance for the children. It might be to pay for education or housing.

Understanding your purpose and setting a goal for your portfolio lets you plan for how much you need to invest and how long you have for your savings to grow.

Good portfolio goals are measurable, attainable and based on reasonable assumptions. That means they do not require impracticable savings targets, lucky breaks or unlikely investment outcomes.

Take the example of an investor who needs to save $1 million in today's dollars to comfortably retire and has 40 years of working life left to do it.

If that investor makes a $10,000 deposit today and saves the same inflation-adjusted amount every year for the 40 years, the real required rate of return from the portfolio only needs to be an achievable 4 per cent per year.

The portfolio construction process begins with this kind of plan.

From there, the next decision is to select the assets that will deliver the required 4 per cent return without exposing the investor to needless risk.

There are three main asset classes for investors to consider: equities, fixed income and cash.

There is also a wide range of sub-groups like real estate, infrastructure and commodities, but most diversified investors will have exposure to them through the equities asset class.

Asset classes are best understood by the way they typically perform in terms of risk and return.

Equities, or shares in stock market-listed companies, are characterised by demonstrating the highest historical return of the three, but with an associated higher risk of loss.

Fixed income investments like government and corporate bonds tend to provide lower returns but come with lower risk of losing money.

Finally, cash provides both low return and very low risk and protects you from the risk of being forced to sell other assets, but its value is continually eaten away by inflation.

So how do investors balance the three?

The aim is to find a way to deliver enough return to achieve the goal while minimising the risk of permanently losing capital on the way.

This concept of risk is worth exploring. Many investors conflate risk with volatility but for a regular investor with a defined goal, a better definition of risk is the chance of losing money at the very point you need it.

A period of negative returns in the market – as we are likely to see in the coming years – may not be a risk for someone willing to wait until the market recovers, thereby avoiding selling during the downturn.

But if another investor needs the money and has to sell at lower prices, that becomes a permanent loss of capital – the definition of risk.

This risk of permanent loss is why younger people can comfortably take more risk in their investments – and thus aim for a higher return – than someone nearer retirement.

A 35-year-old has at least 30 years of earning income ahead of them, allowing market downturns to run their course. Their income covers their living expenses, so they don't need to withdraw investments at depressed prices, and they even get more assets for every dollar they invest during the downturn. This means they can lean towards equities which offer higher returns at higher risk.

Someone in their 50s has 15 years left of income to recover losses and might choose to take slightly less risk in their investments by reducing their equity holdings.

A retired person has no easy way to add to their investments so if they are forced to withdraw at depressed prices, they suffer permanent loss. In retirement, an even more conservative portfolio might be suitable.

For all investors, constructing a diversified portfolio spread across the three asset classes is the best way to reduce the risk of permanently losing money.

Asset allocation is a surprisingly powerful tool.

Repeated studies show that the vast majority of variability in portfolio returns is explained by asset allocation rather than stock selection or market timing.

So, by simply selecting an asset class mix that suits your risk and return needs – and then buying a widely diversified bundle of investments matching that mix – most of the work of portfolio construction is done with no need to worry about individual investments at all.

Contrast this kind of steady, planned, top-down approach with the bottom-up, investment-collecting approach many investors take.

By buying individual stocks and funds without giving thought to the overall portfolio construction, investors are introducing unnecessary risk to their investments and crimping potential returns.

Portfolios built this way often show concentration in an industry or sector and are prone to being buffeted by volatility and attempts at market timing.

A well-constructed portfolio should also diversify by holding assets across a variety of countries, sectors and industries. Investors may even want to consider a mix of investment styles by holding active managers alongside index funds.

By holding hundreds or thousands of individual securities, the chances of any one of them affecting total returns is minimised.

The next factor to consider is fees. One of the best predictors of the future performance of an investment is the fee it charges. Some find it surprising, but the cheaper the fee, the better the performance. This is because the less you pay in costs, the more of an investment's return you get to keep.

Minimising costs is a crucial part of portfolio construction.

And finally, once the portfolio is in place, the critical trick is to stay the course.

Too many investors have been provoked by market swings to buy and sell at the wrong time, driven by fear or impulse.

A disciplined, long-term approach – rebalancing from time to time to stay within a chosen asset allocation and adjusting the risk profile as you age – gives you the best chance of achieving your goal.

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard.

Please contact us on |PHONE| if you seek further assistance on this topic .

Source : Vanguard July 2020 

Reproduced with permission of Vanguard Investments Australia Ltd

Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance.


© 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Source: MLC General article newsletter

Tax treatment of COVID-19 support payments

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Tax treatment of COVID-19 support payments

For most Australians, this tax time will be unlike any other.

If you’ve lost your job, had to work reduced hours due to COVID-19, or met other eligibility criteria, you may have received government assistance like JobKeeper, extra JobSeeker, or accessed some of your super early to help cover expenses.

So how will this new source of income affect your tax return—and do you need to disclose it?

JobKeeper payments

JobKeeper payments (up to $1,500 per fortnight) will be treated the same way as wages or income. This means these payments will be taxed and must be disclosed in your tax return.

If you’ve received JobKeeper payments from your employer, those payments will be included as part of your income statement which your employer provides to the ATO. You can view this statement in your MyGov account or your tax agent can access it on your behalf.

Be aware that if you previously earned less than the JobKeeper amount, your income may go over the tax-free threshold.

For example, if your salary increases from $800 to $1500 a fortnight as of March 2020 because of JobKeeper, you may be required to pay more tax due to earning a higher income. On the flip side, you may also get a larger refund if you earn more money but still fall under the $18,200 tax-free threshold.

JobSeeker payments

If you received a JobSeeker payment from Services Australia (previously known as the Department of Human Services), this amount will be taxed as regular income and will need to be included in your tax return.

The ATO should automatically populate this information for you under the 'government payments and allowances' section in your tax return. But it won't necessarily be there from 1 July 2020.

If you find that this information is missing, you or your tax agent will need to populate it yourselves or complete your tax return once the information appears.

Small businesses

If your business received JobKeeper payments to help make up for a fall in turnover, you’ll need to disclose these payments as part of the assessable income of the business for the financial year.

The ATO is also allowing businesses to vary PAYG instalments if the business believes that the current rate is too high given the effects of COVID-19 compared to the previous estimated tax for the year.

Insurance, redundancy and leave payouts

Any payments you may have received because your income was disrupted —such as an income protection insurance payout, sickness, or accident insurance claim—must be declared in your tax return in the normal manner for such payments. This also goes for a redundancy payout and paid leave.

As the tax treatment of these vary, it’s best to follow the instructions that are provided against each of these items if you are completing your own tax return, and talk to your tax agent.

Early release of super

If you accessed part of your super under the COVID-19 early release of super payment, you won’t be required to pay any tax on the payment so you don’t need to disclose it in your tax return.

It may be worth discussing your government support payments with your accountant or contact us on |PHONE| to make sure you get maximum benefit with minimal workload.

Source : MLC Insights July 2020

Important information and disclaimer

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. The information in this article is current as at July 2020 and may be subject to change. This information may constitute general advice. The information in this article is factual in nature and does not take into account personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. An investment with NULIS is not a deposit with, or liability of, and is not guaranteed by NAB or other members of the NAB Group. Opinions constitute our judgement at the time of issue. In some cases information has been provided to us by third parties and while that information is believed to be accurate and reliable, its accuracy is not guaranteed in any way. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the NAB Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication. Past performance is not a reliable indicator of future performance. The value of an investment may rise or fall with the changes in the market.

Source: MLC General article newsletter

A handy toolkit for small business

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A handy toolkit for small business

Whether you use a registered tax agent or lodge your own tax return, it’s helpful to have information you can refer to when you want to get ready for tax time.

The Tax Time 2020 toolkit is now available, and it includes a directory of links as well as several updated, and new, fact sheets for small business.

The fact sheets can help you get an overview of what you need to know if you're:

  • claiming deductions for the costs of using your home as your main place of business

  • claiming a deduction for motor vehicle expenses for your business

  • claiming a deduction for expenses you incur when travelling for your business

  • a director or shareholder of a company that operates a small business, and you take money out of your company or use its assets.

We also have information to help if you’ve had to pause or permanently close your business due to COVID-19.

Ask for help if you need it, it’s never too late to speak with us or a registered tax professional.

Please contact us on |PHONE| to seek further information on this topic.

Source : Ato.gov.au Small business newsroom June 2020 

Reproduced with the permission of the Australian Tax Office.

This article was originally published on https://www.ato.gov.au/Newsroom/smallbusiness/General/A-handy-toolkit-for-small-business/

Important: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Source: MLC General article newsletter

Why improving financial literacy could open the door to advice

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Why improving financial literacy could open the door to advice

CoreData’s research over the past two decades has consistently found that at any point in time, only around one in four Australians are receiving financial advice.


This is a relatively low proportion considering we have also consistently found that the value of financial advice is clear, both at a tangible and intangible level. Those who receive financial advice tend to save more than those who do not receive advice, manage their debt better, have a better-performing investment portfolio and have adequate insurance cover, to name just a few of the benefits.

As a result, those who are receiving financial advice tend to have less stress, a greater sense of control, greater peace of mind and improved well-being, both financially and holistically. After all, we know that financial issues can and do have an impact on physical and mental health and on the relationships of Australians.

Despite this impressive array of evidence however, the market penetration of financial advice has remained relatively low, and one potential reason may lie with a certain group of Australians.

The 2018 Household, Income and Labour Dynamics in Australia (HILDA) Survey, conducted by the University of Melbourne’s Melbourne Institute, provides a comprehensive objective snapshot (as opposed to a subjective self-rated assessment) of Australians’ financial literacy by asking five questions about basic financial concepts (see box for the questions).

It was found that fewer than half (42.5 per cent) of Australians could answer all five questions correctly, with women and younger Australians performing worst. 

It was also found that those with lower financial literacy usually have poorer financial health, save less, and are consequently more vulnerable to experiencing financial stress.

 

Unfortunately, it is women and younger Australians with lower financial literacy who are more likely to be under-serviced by the financial advice sector. Although they tend to be less wealthy, the need to budget effectively, pay off debt and save more does not disappear and is likely to be more critical as they have less of a financial buffer for unexpected needs. 

Although they are typically less inclined to seek financial advice given a perception that their less complex financial circumstances do not warrant it, too many may have been overlooked by financial advisers given their lower wealth profile.

While some of those with lower financial literacy may be living in blissful ignorance about their relatively poor financial situation and choose not to do anything to improve it, many are likely to be well aware that their financial situation could be better and have a desire to improve it – the very people who could benefit from receiving financial advice.

Although some of those with lower financial literacy may have a natural inclination or preference to manage their finances themselves, given their generally poorer financial health, many could probably do with and actually want the support of a financial adviser. However, they are typically hampered by a range of barriers to turn the motivation into action, particularly the lack of perceived need and the perceived high cost relative to value.

 

Clearly the financial advice sector needs to do more to highlight the value of receiving financial advice to the masses, including those with lower financial literacy, emphasising that it is not just for the wealthy or those with complex financial needs. 

More work also needs to be done towards providing cheaper and simpler financial advice for less complex financial matters to make it more accessible for Australians. Encouragingly, some work has already been done on these fronts. 

But the work needs to be done consistently over the long-term to make a real difference in lifting the market penetration of financial advice and ultimately improving the well-being of Australians, financially and holistically.

 

Source: 

By Fumin Rianto, Head of Operations at CoreData.

Reproduced with the permission of CoreData Research. This article was originally published on New Model Adviser, a website powered by CoreData Research, showcasing its research and insights on financial advice: the profession, advisers, advice practices, licensees, legislation and more.

Important:

This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

 

Source: MLC General article newsletter

Starting the investment journey late

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Starting the investment journey late

The power of compound returns is startling and the mathematics in favour of starting to save early in life is undeniable.

At a 4 per cent annual return, $100,000 invested today will grow to around $580,000 over the course of a regular 45 year working life.

Vanguard's retirement planning team has a worked example online1. A person starting at age 20 and saving $4,500 a year has a good chance of having $1 million in retirement. At 30, they would need to save $9,000 a year. And if they wait until 40, they need to save $18,000 a year to hit the same goal.

That's all very well for the young, but what of us that didn't hear that lesson in our 20s and find ourselves mid-career starting to think about putting something away for retirement?

And as the old radio ad said, the best time to start might well have been 20 years ago, but the second-best time is now even with the challenges being thrown up by the COVID-19 pandemic. Not surprisingly the global health emergency has people much more focussed on short-term particularly if employment or business income has been affected.

But with more people working from home then there may be a good opportunity to devote some of that time by getting back to basics.

First things first – starting late means making a genuine effort to understand your financial plan. How much do you really need to retire? And how long do you have?

The answer to this important question will set the scene for how much you need to save. Saving for retirement is effectively a balance between your quality of life today and quality of life tomorrow.

Only once you have a plan, can you work out how much you need to save each year.

The clearest path to a comfortable retirement is to step up the amount saved each year which can only be achieved by earning more, spending less or both.

Big ticket ways to spend less include renegotiating mortgage rates lower, paying down credit card debts and personal loans and avoiding replacing things like vehicles and home appliances where possible.

Whatever path taken, the extra savings can be used to prepare for retirement in two ways – paying down debt and investing for growth.

So how to decide between those two? It is almost always best to pay down personal debts with high interest rates first. That means getting rid of those credit card and personal debts. Retiring debt free is the holy grail. Any debt repayments you need to make in retirement directly reduce the amount of money you have to spend.

The next question is asset allocation.

With a shorter timeframe a key decision is in setting realistic goals for when you retire. If higher returns will be required that generally means taking on higher risk.

A key strategy here is shifting asset allocation away from assets like cash and fixed interest towards growth assets like equities. Understanding your risk tolerance as an investor is key in this step. You will need to understand the various types of risk that each asset brings. This could be a good time to consult a financial adviser.

Historically, equity investments like stocks have provided higher returns than fixed interest investments like bonds. This higher return comes with higher risk and so a diversified approach is critical. Setting realistic goals is also where a financial adviser can add real value.

You could choose to use an index funds-only investment strategy, which aim to replicate the performance of the market or, use an active investment strategy through the use of actively managed funds that seek to beat market performance. Or, you could choose to use a blend of both.

The important thing to note about the use of actively managed funds is that they typically have higher fees than funds which seek to track the index. And higher costs will always eat away at returns.

Even if you've waited a long time to begin your investment journey, it is always better late than never to start planning for your retirement. 

Please contact us on |PHONE| if you seek further assistance on this topic .

Source : Vanguard

Written by Robin Bowerman, Head of Corporate Affairs at Vanguard. 

Reproduced with permission of Vanguard Investments Australia Ltd Vanguard Investments Australia Ltd (ABN 72 072 881 086 / AFS Licence 227263) is the product issuer. We have not taken yours and your clients' circumstances into account when preparing this material so it may not be applicable to the particular situation you are considering. You should consider your circumstances and our Product Disclosure Statement (PDS) or Prospectus before making any investment decision. You can access our PDS or Prospectus online or by calling us. This material was prepared in good faith and we accept no liability for any errors or omissions. Past performance is not an indication of future performance. © 2020 Vanguard Investments Australia Ltd. All rights reserved.

Important:
Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Source: MLC General article newsletter

Protecting yourself from Super and Investment scams

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Protecting yourself from Super and Investment scams

Super and investment scams target your personal wealth by convincing you to invest in fake schemes and companies. They’re very skilled at convincing you that their scam is real and unfortunately are very widespread, taking many different forms.

A super scam is when someone tries to access your super and withdraw your money. An investment scam is when someone tries to convince you that an investment is real so you invest your money in whatever it is they are offering.

This article will help you stay informed of the most common types of investment scams and arm you with the facts needed to make smart investment decisions. Most of these scams start with an unexpected call claiming to be from a superannuation or financial service organisation.

Common super and investment scams to look out for

  • You receive an offer from a financial adviser or a scammer posing as one. The scammer may ask you to agree to a story to ensure the early release of your super and then, acting as your financial adviser, they’ll deceive your super fund into paying out your super benefits directly to them. Once they have your money, the scammer may take large 'fees' out of the released fund or leave you with nothing at all.

  • You receive a call or email from a stockbroker offering amazing investment opportunities with high returns and a low risk. In reality, this ‘stockbroker’ is unregistered and intends to steal all the money you invest.

  • You receive an insider tip about a company about to take off and are encouraged to buy shares. What appears to be a once-in-a-lifetime opportunity, is simply a pyramid scheme designed to raise money through the investments of many people.

  • You’re invited to an investment seminar with free advice, food and drinks. At the event, you’re persuaded to invest in high-risk strategies that turn out to have hidden fees and undisclosed charges. You might also be encouraged to purchase expensive investment strategy books.

COVID-19 and early access to super scams

The Australian Government has recently warned people to be extra vigilant against scammers targeting those financially impacted by the COVID-19 pandemic1. Scammers are taking advantage of people in financial hardship in a variety of phishing scams designed to steal their super, or by offering unnecessary services and charging a fee. 

Scamwatch has received over 2,700 scam reports mentioning the coronavirus with over $1,114,000 in reported losses since the outbreak of COVID-19.”2

Scammers are using fake vouchers, financial assistance claims or general information around COVID-19 as bait to ‘phish’ for your personal information, including your superannuation. They may try to contact you by cold calling, or may send a text message or email containing malicious links. Scammers can disguise themselves as well-known businesses and government agencies such as myGov, the Department of Health and the ATO, to trick you into sharing your personal information. Once they have your details they can pretend to be you and access your super.3

Keep an eye out for any of the following:

  • advertisements promoting early access to super

  • offers to 'take control' of your super

  • offers to move your super to a self-managed super fund (SMSF) so you can access the money

  • offers of quick and easy ways to access or 'unlock' super

  • asking for your personal and financial information

  • luring you into opening malicious links or attachments

  • gaining remote access to your computer

  • seeking payment for a fake service or something you did not purchase

Remember: The only way to apply to withdraw your super if you are eligible under the new COVID-19 early release scheme is through my.gov.au

If you think you’ve been targeted by someone who is trying to access your super early, please contact MLC immediately 132 652, or you can report it to ASIC on their online complaint form or call the ATO on 13 10 20.

Protecting yourself

Having trouble trying to spot a super or investment scam? How can you help protect yourself from scammers?

The following is a list of key things you should be looking out for to ensure you don’t fall victim to a scammer.

  1. Never give information about your superannuation to someone who has contacted you, even when you think it is a trusted organisation. This includes offers to help you access your superannuation early under the government’s new arrangements —just hang up and verify their identity by calling the relevant organisation directly. Never provide your account login details to a third party.

  2. The ATO is coordinating the early release of super through myGov. There is no need to involve a third party or pay a fee to get access under this scheme.

  3. Don’t click on hyperlinks in text/social media messages or emails, even if they appear to come from a trusted source. MLC will never send you an email asking for your password, or with a direct link to a login page to access your account.

  4. Always be suspicious of investment opportunities that promise a high return with little or no risk—If it sounds good to be true, then it probably is.

  5. Check if a financial advisor is registered via the ASIC website. Any person or business offering advice about financial products must hold an Australian Financial Services licence from ASIC.

  6. If in doubt, you can check MoneySmart’s list of companies you should not deal with. If the company that called you is on the list, do not deal with them.

  7. Never let anyone pressure you into making decisions about your money or investments and never commit to any investment at a seminar. Always get independent legal or financial advice first.

What to do if you’re worried

We’re committed to protecting your super and investment savings and have strong measures in place to detect suspicious behaviour –  but if you believe you may have fallen victim to a scam, please contact MLC immediately on 132 652.

If you receive a suspicious email, do not click on any links or attachments. Please forward it to phish@nab.com.au and then delete it. You can also visit the Scamwatch website for more information and examples of scams.

1https://www.scamwatch.gov.au/types-of-scams/current-covid-19-coronavirus-scams

2Ibid

3https://www.accc.gov.au/publications/superannuation-early-access-scams-fact-sheet

Source : MLC Insights June 2020

National Australia Bank Limited. ABN 12 004 044 937 AFSL and Australian Credit Licence 230686. MLC Limited uses the MLC brand under licence. MLC Limited is a part of the Nippon Life Insurance Group and not part of the NAB Group of Companies. The information contained in this article is intended to be of a general nature only. Any advice contained in this article has been prepared without taking into account your objectives, financial situation or needs. Before acting on any advice on this website, NAB recommends that you consider whether it is appropriate for your circumstances. Important: Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Source: MLC General article newsletter

Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, July 2020

By | MLC Economic | No Comments

Monetary Policy Decision – Statement by Philip Lowe, RBA Governor, July 2020

At its meeting today, the Board decided to maintain the current policy settings, including the targets for the cash rate and the yield on 3-year Australian Government bonds of 25 basis points.

 

The global economy has experienced a severe downturn as countries seek to contain the coronavirus. Many people have lost their jobs and there has been a sharp rise in unemployment. Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed. Despite this, the outlook remains uncertain and the recovery is expected to be bumpy and will depend upon containment of the coronavirus. Over the past month, infection rates have declined in many countries, but they are still very high and rising in others.

Globally, conditions in financial markets have improved. Volatility has declined and there have been large raisings of both debt and equity. The prices of many assets have risen substantially despite the high level of uncertainty about the economic outlook. Bond yields remain at historically low levels.

In Australia, the government bond markets are operating effectively and the yield on 3-year Australian Government Securities (AGS) is at the target of around 25 basis points. Given these developments, the Bank has not purchased government bonds for some time, with total purchases to date of around $50 billion. The Bank is prepared to scale-up its bond purchases again and will do whatever is necessary to ensure bond markets remain functional and to achieve the yield target for 3-year AGS. The yield target will remain in place until progress is being made towards the goals for full employment and inflation.

The Bank's market operations are continuing to support a high level of liquidity in the Australian financial system. Authorised deposit-taking institutions are continuing to draw on the Term Funding Facility, with total drawings to date of around $15 billion. Further use of this facility is expected over coming months.

The Australian economy is going through a very difficult period and is experiencing the biggest contraction since the 1930s. Since March, an unprecedented 800,000 people have lost their jobs, with many others retaining their job only because of government and other support programs. Conditions have, however, stabilised recently and the downturn has been less severe than earlier expected. While total hours worked in Australia continued to decline in May, the decline was considerably smaller than in April and less than previously thought likely. There has also been a pick-up in retail spending in response to the decline in infections and the easing of restrictions in most of the country.

Notwithstanding the signs of a gradual improvement, the nature and speed of the economic recovery remains highly uncertain. Uncertainty about the health situation and the future strength of the economy is making many households and businesses cautious, and this is affecting consumption and investment plans. The pandemic is also prompting many firms to reconsider their business models. As some businesses rehire workers as demand returns, others are restructuring their operations.

The substantial, coordinated and unprecedented easing of fiscal and monetary policy in Australia is helping the economy through this difficult period. It is likely that fiscal and monetary support will be required for some time.

The Board is committed to do what it can to support jobs, incomes and businesses and to make sure that Australia is well placed for the recovery. Its actions are keeping funding costs low and supporting the supply of credit to households and businesses. This accommodative approach will be maintained as long as it is required. The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band.

Source: Reserve Bank of Australia, July 7th, 2020

Enquiries

Media and Communications
Secretary's Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Email: rbainfo@rba.gov.au

Source: MLC Economic Monthly update

How to stay motivated as a new business owner

By | MLC General News | No Comments

How to stay motivated as a new business owner

Finding motivation for starting a new business can be easy to come by, but as time passes these feelings may begin to fade. So what do you do when motivation is lacking?

The buzz and excitement of all the things a new business owner discovers each day, coupled with the joy of being your own boss can make it easy to bounce out of bed while things are getting underway.

At this stage, motivation for your business is high – but chances are it won’t remain this way forever.

For many business owners, the buzz and drive may remain for years, but then one day you no longer have that level of excitement in your belly and you may begin finding it hard to jump out of bed.

It happens to all us at different times and for different reasons. So the skill we need to develop is to identify when our motivation is lacking and take steps to build it back up.

A simple definition of motivation

Issues with motivation can’t be solved without first coming to terms with what motivation is, versus what it isn’t.

In short, motivation is your reason for doing what you do. It isn’t your energy levels as such, but rather the ‘why’ behind that energy.

For new business owners, that ‘why’ should be obvious to you. But there are circumstances when it can start to slip.

Why do we lose motivation?

Let’s first look at some of the reasons why we lose motivation.

From my experience, there are three main reasons:

  • No challenge – Doing the same thing, while exciting when you first started your business, has now lost its excitement or edge. As business owners we need challenges to keep it stimulating for us. As we gain experience, the challenges we had before become part of everyday business and the ‘same old, same old’.

  • Exhaustion – The stress of worrying about business 24/7 and all the things that have to be done can take its toll, particularly if you are unable to have a break from work. There are some great aspects about building business, but it can also grow the workload and cause you to feel overwhelmed. For others juggling the priorities of the business with life priorities can sap motivation.

  • Unexpected setbacks – Those surprises that can derail you, such as that job you thought you had not eventuating, or a customer complaint that you didn’t see coming or believe was justified. Ouch! That can take the wind out of your sails. For other business owners it might be the lack of appreciation from clients, an unexpected bill or hurdle with money that makes them lose their motivation.

How can we find motivation once it’s lost?

The longer you have been in business the more likely you are to have experienced some of these motivation-sapping feelings.

The good news is that as business owners we are a resilient bunch and we always find ways to get our motivation back.

So here are six ideas for you to try next time you’re feeling demotivated.

READ: Should you throw out your business plan?

1. Revisit your goals

Understanding why you are in business and what you want to achieve can be a great source of motivation and sometimes we can forget.

Getting reacquainted with your purpose for being in business may be enough to reignite motivation.

Revisit those goals and throw any out that aren’t serving you or the business anymore. Set short term goals such as daily, weekly and monthly goals as well as long term goals.

2. Mix it up

Doing something differently can get your engines running again.

It could be as simple as cleaning your workspace or mixing your boring tasks with some of the more fun tasks.

For more inspiration, consider visiting your competitors or going interstate or overseas for new ideas.

Book in to a conference or training workshop. Or, if that’s something you do every year, then maybe consider not doing that this year and go on a holiday instead.

3. Get support

Have a chat about how you are feeling with friends or other business colleagues.

Every business owner at some point in their business journey would have felt the same and talking about it can make you feel better.

READ: 4 signs that your startup needs to hire

4. Reconnect with hobbies

Our business may be our life and where we put most of our energy, but we do need outlets other than business.

Shifting the focus from work for a day or on a regular basis can help you put things in perspective.

Choose a hobby that you love and that brings you joy and spend a little time doing that. It might be taking a day off to play golf, play music, read a book, catch a movie, bushwalk, surf, yoga, shop, gardening or going for a bike ride. Whatever helps you feel accomplished and takes your mind of work.

5. Have a holiday

Take some time out.

If you can’t take a holiday this year, then book one for next year. Knowing you have a holiday coming up can be extremely motivating. We all need to recharge our batteries.

READ: Why you need to start planning your next holiday today

6. Challenge yourself

Identify ways you can improve your business.

Seek feedback from customers or a business coach and make a plan for improvement. You might also consider setting a new business stretch goal that is achievable but challenging.

Throughout your business lifecycle you will have times when your motivation is low. The key to being successful in business is to be able to identify when you need a boost.

Try one of these six suggestions and I’m sure your motivation will be back before your next BAS is due.

Tags mentor productivity small business tips starting out work life balance

Source : MYOB April 2019

Reproduced with the permission of MYOB. This article by Ailsa Page was originally published at https://www.myob.com/au/blog/six-tips-stay-motivated-new-business-owner/

Important:
This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author.

Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Source: MLC General article newsletter