YOUR PERSONAL
WEALTH
We are still in the grips of COVID-
19. Australia has had to retreat
globally, closing the borders
internationally as well as
domestically. The US stock market
crash on March 9 pre-empted the
continued volatility of markets.
WELCOME TO
THE SUMMER
EDITION OF
YOUR PERSONAL
WEALTH.
S U M M E R 2 0 2 0
INSIDE OUR SUMMER EDITION
Life after COVID-19
Markets rally on positive vaccine news
Super boost in 2021?
Making your home loan fit you
There is no doubt this year has
been a year of disruption,
uncertainty and for many,
financial and emotional upheaval.
Australia began the new year in
the grip of bushfires, polluting the
air and creating a sense of
foreboding for what was to come.
The COVID-19 pandemic emerged,
with the World Health
Organisation announcing on
January 9 that a deadly
coronavirus had emerged in
Wuhan, China. Very few could
have predicted the pace and
veracity of the spread of this virus
worldwide.
As we reach the close of 2020, it is
important to reflect and
appreciate the resilience and
strength demonstrated this year,
and look forward to the
opportunity that 2021 offers all of
us.
Thank you for your loyalty
throughout 2020.
We wish you and your family
wonderful festive season, and
looking forward to working with
you again in 2021.
48%
Are limiting the
price of gifts for
family and friends
16%
Will opt for
Secret Santa
11%
Will regift
unused items
16%
Will give
handmade gifts
5.4 million
Will be relying on credit to fund
Christmas this year
FUNDING CHRISTMAS
Source: finder.com.au
Due to COVID-19 not everyone will have
enough savings to have a lavish Xmas. Here's
how Aussies will be funding Christmas.
On a positive note, the pressure of
2020 has brought out the best in
many. Lockdowns and restrictions
have enhanced our appreciation of
the importance of community and
being connected with others.
The opportunity to slow down, and
appreciate time spent with loved
ones, has definitely been a positive
outcome.
Things don’t always go to plan…
The Keating government back in 1992 intended that
the super guarantee would reach 12% by 2001.
Changes of government have resulted in the increase
to the super guarantee stalling. The government
went to last year’s election with the policy of
delivering the increase to 12% by 2025.
The impact of the increase on employers and
employees
It is important to understand that this increase will
have to come from somebody’s pocket. In most cases,
it will be taken from your pay packet, resulting in less
“take-home” pay.
Early super withdrawals
The government allowed early withdrawal from super
due to the Coronavirus recession. More than $34.8
billion has been withdrawn from super this year*.
We will have to wait and see whether the government
continues to pursue its super increase plans, given the
current economic environment.
We have conversations frequently with our clients
about the importance of having a plan in place, to
ensure that you live comfortably in retirement.
We encourage you to contact the office to discuss how
we can help you get there.
*Source: https://www.apra.gov.au/covid-19-early-release-scheme-issue-28
July 1, 2002 – June 30, 2013 9
July 1, 2013 – June 30, 2014 9.25
July 1, 2014 – June 30, 2021 9.5
July 1, 2021 – June 30, 2022 10
July 1, 2022 – June 30, 2023 10.5
July 1, 2023 – June 30, 2024 11
July 1, 2024 – June 30, 2025 11.5
July 1, 2025 – June 30, 2026 12
Date
Super Guarantee
(%)**
COVID-19 might put a spanner in the works for the
ongoing super guarantee (SG) increase, which was
slated to increase from 9.5% to 10% on 1 July 2021.
The super guarantee is the minimum amount of your
earnings that your employer, or you if you are self-
employed, has to contribute to your superannuation.
The idea is that this money will help you fund your
retirement years, and it will take pressure off the
aged pension system.
As Australia’s baby-boomers age, the burden of the
age pension and other income support schemes for
seniors will continue to increase.
This financial year it has cost the federal budget
more than $50 billion. You can understand why the
government is still pushing hard to increase the
super guarantee to 12% by 2025 (as per the
legislated increases).
McCrindle Research recently produced a report
examining the impact of this year on savings capacity,
and what Australians planned to do with those savings.
S U M M E R 2 0 2 0
LIFE AFTER COVID-19
Source: McCrindle Research - Australia Post-COVID-19: Understanding how COVID-19 has shaped
our society.
SUPER BOOST IN 2021?
** Source: https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?
anchor=Superguaranteepercentage
National Australia Bank has just
lifted its forecast for 3rd quarter
GDP growth to 4%, up from a flat
forecast in September.
However, the Republicans look to
have picked up around a dozen
House seats. Of concern to
markets though is that the Senate
is still in play with two run-off
elections in the state of Georgia
on January 5, 2021.
Also, the RBA lowered its cash
rate target to 0.1% from 0.25%
and said it would remain there for
three years. It also announced
$100 billion of Quantitative Easing
over the next six months.
MARKETS RALLY ON POSITIVE VACCINE NEWS
S U M M E R 2 0 2 0
OUTLOOK AND MARKETS
Massive fiscal and monetary
stimulus as well as statements by
Central Banks (US Fed and RBA for
example), that interest rates will
stay low for several years has
helped lift all growth assets
including shares.
The prospect of an effective
vaccine has provided an extra kick
to more cyclical sectors such as
financials, energy and travel
stocks. In fact, there has been a
big rotation to cyclical or value
stocks (or re-opening stocks) at
the expense of “safe” technology
stocks. This should be positive for
Australian equities relative to
global equities given the
proportion of cyclical stocks in our
market (banks, resources etc.).
Making forecasts in this
environment is very difficult.
However, what we are seeing in
Australia is upgrades to both
company earnings and to GDP
growth estimates. According to JP
Morgan (AFR, Nov 6) "If you look
at it on a one-month basis, every
single sector over the past month
has seen positive earnings
revisions, with the exception of
utilities. The number of
companies that are upgrading
[earnings] is pretty much at all-
time highs”.
It is not all good news though as
the number of COVID-19 cases
has been rising in Europe and the
US. The resultant shutdowns will
impact short-term growth but the
markets have so far been willing
to look through this as there is
now light at the end of the tunnel.
The other major development was
the US Presidential election which
appears to have been won by the
Democratic candidate.
Equity markets had been in a
holding pattern but have rallied
strongly in November on the back
of good vaccine trial data. Both
Pfizer and Moderna announced
that their vaccines were around
95% effective in preventing
COVID-19.
These results were well ahead of
expectations and have fuelled
equity market rallies.
The expectation is that these two
candidates will be submitted to
the US FDA for approval any day
now and approval will come
shortly thereafter. US Operation
Warp Speed will then kick in and
the vaccines should start being
available for use within 24 hours.
The expectation is that upwards of
twenty million people in the US
will be vaccinated before year end
and roughly two billion doses
(enough for one billion people)
should be produced by these two
firms in 2021, if both candidates
are approved.
A rebound in consumer spending
as the economy reopens and an
expected lower peak in the
unemployment rate were cited.
Earlier in the year it was thought
that the housing market would
collapse and drag down the
economy. ANZ has now replaced
its forecast of a 10% fall in home
prices in 2020, with a forecast 2%
rise, and a 9% gain in 2021.
The biggest risk to markets (apart
from equity valuations of over 20x
price earnings) are the two run-off
elections in the US state of
Georgia on January 5. If Biden is
declared the winner (on 14 Dec),
and the Democrats win both
seats, there will be no constraint
on what legislation they could
enact.
Markets have reacted well after
the US election because divided
government looked likely. As the
leader of the Senate Democrats
has said, “If we win Georgia, we
will change America”. Both
Republicans finished ahead in the
recent election, however anything
is possible and markets would
react very negatively to a
Democratic clean sweep.
When considering a home loan, the first and often
only comparisons made by most borrowers are the
interest rate and fees charged. Home loans come with
so many options that it is worthwhile taking a look at
the features of each loan to see which one suits your
specific needs.
Offset account – the ability to save surplus funds
within a separate bank account which can be used to
offset the interest liability on your loan—saving you
interest over the long term.
Additional repayments – the ability to pay additional
funds off your loan without penalty. This will help
reduce your debt quicker and also save you more on
interest.
Split loan – the ability to split your loan balance to
have a portion on a fixed rate and a portion on a
variable rate. Sometimes you can have it both ways.
Repayment holiday – the ability to take a break from
repayments or make reduced payments for a period of
time to cover life events such as job redundancy or
maternity leave.
Redraw facility – the ability to make additional
repayments on your loan with the option of
withdrawing the funds again at a later time if required.
Portable loan – the ability to apply your loan to a
replacement home if you sell and move to another.
Top-up – the ability to increase your borrowing limit
without the need to apply for a new loan.
Prior to making any big decision, always seek
professional guidance. You could significantly reduce
your fees, interest and stress. Ask us how.
MAKING YOUR HOME LOAN FIT YOU
AFSL 229892 ABN 23 065 921 735
Level 23, 25 Bligh Street, Sydney, NSW, 2000
Tel. 02 9252 2000 Email: advice@lifespanfp.com.au
www.lifespanfp.com.au
Disclaimer: The articles in this newsletter are of a general nature only and are not to be taken as recommendations as they might be unsuited to your
specific circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person and
should not be used as the basis for making any financial or other decisions. Your Lifespan adviser or other professional advisers should be consulted prior
to acting on this information. This disclaimer is intended to exclude any liability for loss as a result of acting on the information or opinions expressed.
S U M M E R 2 0 2 0
CONTINUED FROM PAGE 3
From our perspective, we would be
wary of making any big bets before
January 5. This is even though
economies and markets look set for
further gains as they eye a post
COVID-19 world.
The issue is that many policy
settings would likely be very
different under one party rule and
this provides a note of caution for
the bulls.
Chart 1: Investment Returns to 31 October 2020 (% p.a.)
Asset Class 1 month 1 Year 3 Years 5 Years
Australian Shares
Global Shares
Listed Property
Fixed Interest
1.93 0.98 -8.15 4.09 6.08
-0.42 2.33 2.90 8.65 8.46
-0.37 5.88 -17.97 2.83 4.47
0.28 0.93 4.00 5.67 4.53
Source: Mercer
3 months