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Summer 2020 Your Personal Wealth Newsletter

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YOUR PERSONALWEALTHWe are still in the grips of COVID-19. Australia has had to retreatglobally, closing the bordersinternationally as well asdomestically. The US stock marketcrash on March 9 pre-empted thecontinued volatility of markets.WELCOME TOTHE SUMMEREDITION OFYOUR PERSONALWEALTH.S U M M E R 2 0 2 0INSIDE OUR SUMMER EDITIONLife after COVID-19Markets rally on positive vaccine newsSuper boost in 2021?Making your home loan fit youThere is no doubt this year hasbeen a year of disruption,uncertainty and for many,financial and emotional upheaval.Australia began the new year inthe grip of bushfires, polluting theair and creating a sense offoreboding for what was to come. The COVID-19 pandemic emerged,with the World HealthOrganisation announcing onJanuary 9 that a deadlycoronavirus had emerged inWuhan, China. Very few couldhave predicted the pace andveracity of the spread of this virusworldwide. As we reach the close of 2020, it isimportant to reflect andappreciate the resilience andstrength demonstrated this year,and look forward to theopportunity that 2021 offers all ofus. Thank you for your loyaltythroughout 2020.We wish you and your familywonderful festive season, andlooking forward to working withyou again in 2021.48% Are limiting theprice of gifts forfamily and friends16% Will opt forSecret Santa11% Will regiftunused items16% Will givehandmade gifts5.4 million Will be relying on credit to fundChristmas this yearFUNDING CHRISTMASSource: to COVID-19 not everyone will haveenough savings to have a lavish Xmas. Here'show Aussies will be funding Christmas.On a positive note, the pressure of2020 has brought out the best inmany. Lockdowns and restrictionshave enhanced our appreciation ofthe importance of community andbeing connected with others. The opportunity to slow down, andappreciate time spent with lovedones, has definitely been a positiveoutcome.

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Things don’t always go to plan…The Keating government back in 1992 intended thatthe super guarantee would reach 12% by 2001.Changes of government have resulted in the increaseto the super guarantee stalling. The governmentwent to last year’s election with the policy ofdelivering the increase to 12% by 2025.The impact of the increase on employers andemployeesIt is important to understand that this increase willhave 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 superdue to the Coronavirus recession. More than $34.8billion has been withdrawn from super this year*.We will have to wait and see whether the governmentcontinues to pursue its super increase plans, given thecurrent economic environment. We have conversations frequently with our clientsabout the importance of having a plan in place, toensure that you live comfortably in retirement.We encourage you to contact the office to discuss howwe can help you get there. *Source: 1, 2002 – June 30, 2013 9 July 1, 2013 – June 30, 2014 9.25July 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 12Date Super Guarantee (%)**COVID-19 might put a spanner in the works for theongoing super guarantee (SG) increase, which wasslated to increase from 9.5% to 10% on 1 July 2021. The super guarantee is the minimum amount of yourearnings 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 yourretirement years, and it will take pressure off theaged pension system. As Australia’s baby-boomers age, the burden of theage pension and other income support schemes forseniors will continue to increase.This financial year it has cost the federal budgetmore than $50 billion. You can understand why thegovernment is still pushing hard to increase thesuper guarantee to 12% by 2025 (as per thelegislated increases).McCrindle Research recently produced a reportexamining 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 0LIFE AFTER COVID-19Source: McCrindle Research - Australia Post-COVID-19: Understanding how COVID-19 has shapedour society.SUPER BOOST IN 2021?** Source:

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National Australia Bank has justlifted its forecast for 3rd quarterGDP growth to 4%, up from a flatforecast in September.However, the Republicans look tohave picked up around a dozenHouse seats. Of concern tomarkets though is that the Senateis still in play with two run-offelections in the state of Georgiaon January 5, 2021.Also, the RBA lowered its cashrate target to 0.1% from 0.25%and said it would remain there forthree years. It also announced$100 billion of Quantitative Easingover the next six months.MARKETS RALLY ON POSITIVE VACCINE NEWSS U M M E R 2 0 2 0OUTLOOK AND MARKETSMassive fiscal and monetarystimulus as well as statements byCentral Banks (US Fed and RBA forexample), that interest rates willstay low for several years hashelped lift all growth assetsincluding shares.The prospect of an effectivevaccine has provided an extra kickto more cyclical sectors such asfinancials, energy and travelstocks. In fact, there has been abig rotation to cyclical or valuestocks (or re-opening stocks) atthe expense of “safe” technologystocks. This should be positive forAustralian equities relative toglobal equities given theproportion of cyclical stocks in ourmarket (banks, resources etc.).Making forecasts in thisenvironment is very difficult.However, what we are seeing inAustralia is upgrades to bothcompany earnings and to GDPgrowth estimates. According to JPMorgan (AFR, Nov 6) "If you lookat it on a one-month basis, everysingle sector over the past monthhas seen positive earningsrevisions, with the exception ofutilities. The number ofcompanies that are upgrading[earnings] is pretty much at all-time highs”.It is not all good news though asthe number of COVID-19 caseshas been rising in Europe and theUS. The resultant shutdowns willimpact short-term growth but themarkets have so far been willingto look through this as there isnow light at the end of the tunnel. The other major development wasthe US Presidential election whichappears to have been won by theDemocratic candidate.Equity markets had been in aholding pattern but have ralliedstrongly in November on the backof good vaccine trial data. BothPfizer and Moderna announcedthat their vaccines were around95% effective in preventingCOVID-19. These results were well ahead ofexpectations and have fuelledequity market rallies.The expectation is that these twocandidates will be submitted tothe US FDA for approval any daynow and approval will comeshortly thereafter. US OperationWarp Speed will then kick in andthe vaccines should start beingavailable for use within 24 hours.The expectation is that upwards oftwenty million people in the USwill be vaccinated before year endand roughly two billion doses(enough for one billion people)should be produced by these twofirms in 2021, if both candidatesare approved.A rebound in consumer spendingas the economy reopens and anexpected lower peak in theunemployment rate were cited. Earlier in the year it was thoughtthat the housing market wouldcollapse and drag down theeconomy. ANZ has now replacedits forecast of a 10% fall in homeprices in 2020, with a forecast 2%rise, and a 9% gain in 2021.The biggest risk to markets (apartfrom equity valuations of over 20xprice earnings) are the two run-offelections in the US state ofGeorgia on January 5. If Biden isdeclared the winner (on 14 Dec),and the Democrats win bothseats, there will be no constrainton what legislation they couldenact. Markets have reacted well afterthe US election because dividedgovernment looked likely. As theleader of the Senate Democratshas said, “If we win Georgia, wewill change America”. BothRepublicans finished ahead in therecent election, however anythingis possible and markets wouldreact very negatively to aDemocratic clean sweep.

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When considering a home loan, the first and oftenonly comparisons made by most borrowers are theinterest rate and fees charged. Home loans come withso many options that it is worthwhile taking a look atthe features of each loan to see which one suits yourspecific needs. Offset account – the ability to save surplus fundswithin a separate bank account which can be used tooffset the interest liability on your loan—saving youinterest over the long term.Additional repayments – the ability to pay additionalfunds off your loan without penalty. This will helpreduce your debt quicker and also save you more oninterest.Split loan – the ability to split your loan balance tohave a portion on a fixed rate and a portion on avariable rate. Sometimes you can have it both ways.Repayment holiday – the ability to take a break fromrepayments or make reduced payments for a period oftime to cover life events such as job redundancy ormaternity leave.Redraw facility – the ability to make additionalrepayments on your loan with the option ofwithdrawing the funds again at a later time if required.Portable loan – the ability to apply your loan to areplacement home if you sell and move to another.Top-up – the ability to increase your borrowing limitwithout the need to apply for a new loan.Prior to making any big decision, always seekprofessional guidance. You could significantly reduceyour fees, interest and stress. Ask us how.MAKING YOUR HOME LOAN FIT YOUAFSL 229892 ABN 23 065 921 735Level 23, 25 Bligh Street, Sydney, NSW, 2000Tel. 02 9252 2000 Email: 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 yourspecific circumstances. The contents herein do not take into account the investment objectives, financial situation or particular needs of any person andshould not be used as the basis for making any financial or other decisions. Your Lifespan adviser or other professional advisers should be consulted priorto 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 0CONTINUED FROM PAGE 3From our perspective, we would bewary of making any big bets beforeJanuary 5. This is even thougheconomies and markets look set forfurther gains as they eye a postCOVID-19 world.The issue is that many policysettings would likely be verydifferent under one party rule andthis provides a note of caution forthe bulls.Chart 1: Investment Returns to 31 October 2020 (% p.a.)Asset Class 1 month 1 Year 3 Years 5 YearsAustralian SharesGlobal SharesListed PropertyFixed Interest1.93 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 4.53Source: Mercer3 months