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* MSCI World ex Australia Index $A Economists are saying that we are in a bear market [2] or maybe even approaching stagflation [3]. It is a tough question but where, in what and with whom should we be investing our money? Would you feel comfortable about investing today in this market that seems to be gyrating so wildly? The Psychology of “fear and greed”! The psychological phenomenon which we always see raising its ugly head regardless of whether the market is “bullish” or “bearish” is that of "fear and greed" When people see certain investment sectors making significant returns in bull markets [4] they rush in; usually buying at the top. This is the greed factor! Investors in this cycle intuitively believe it is not dangerous to invest and that they can't lose as the sector is clearly doing well. Conversely when these same people see sectors crashing around their ears they leave them in droves because they think they will lose even more of their money if they wait any longer. This of course is the fear factor! So they sell down, turning their "book" loss into a "real" loss and then up and buy into another sector which is doing well (again at the top of its market!). In the current turbulent cycle this way of thinking suggests there is no point buying a bargain. These trends see people buying at the top and selling at the bottom of investment cycles. Intrinsically we know that without risk there is no reward, but where do you think is the most appropriate place to take the risk; at the top of the market or at the bottom? Time in the market .. History has shown that sticking with your investment strategy when times are difficult as opposed to panic selling when markets are falling can pay off handsomely over the long term. Look at these returns for the different sectors over the last 20 years:
A patient investor who maintained their investment in the Australian share market over the last 20 years could have posted annualized returns above 12% pa to the end of June 2008. This figure includes some of the negative impact of the last 12 months in addition to other market shocks ... October 19th 1987 (a drop of 22%); the tech wreck of 2000; 9/11 in 2001; and SARS in 2003. These have all been and gone now, though each had a big impact on the markets at the time. We understand that it is tough to hang in there and not succumb to the "sell sell sell" mentality, but with good quality investments that stand the test of time there is no need to panic. Please feel free to contact us if you have any queries. LBW Financial Services Pty Limited
[1] Source: Lonsec Sep Qtr review. [2] Please refer to information sheet attached. [3] Please refer to information sheet attached. [4] Please refer to information sheet attached. [5] Source: Russell Investments comparison of various sectors for the 20 years to 31 December 2007.
Definitions:
Bear market A bear market is described as being accompanied by widespread pessimism. Investors anticipating further losses are motivated to sell, with negative sentiment feeding on itself in a vicious circle. The most famous bear market in history was after the Wall Street Crash of 1929 and lasted from 1930 to 1932, marking the start of the Great Depression. A milder, low-level long-term bear market occurred from about 1973 to 1982, encompassing the stagflation economy, energy crises in the 1970s, and high unemployment in the early 1980s. Prices fluctuate constantly on the open market; a bear market is not a simple decline, but a substantial drop in the prices of a range of issues over a defined period of time. According to The Vanguard Group, "While there’s no agreed-upon definition of a bear market, one generally accepted measure is a price decline of 20% or more over at least a two-month period." However, no consensual definition of a bear market exists to differentiate clearly a primary market trend from a secondary market trend. The markets most recently entered a Bear Market in July 2008 when the S&P 500 Index, Dow Jones Industrial Average and NASDAQ Composite were all down 20% from their October 2007 highs. Investors frequently confuse bear markets with corrections. Corrections are much shorter lived, whereas bear markets occur over a longer period with typically greater magnitudes of loss from top to bottom. Bull market A bull market tends to be associated with increasing investor confidence, motivating investors to buy in anticipation of future capital gains. A notable recent bull market was in the 1990s when the U.S. and many other global financial markets rose rapidly. In describing financial market behavior, the largest group of market participants is often referred to, metaphorically, as a herd. This is especially relevant to participants in bull markets since bulls are herding animals. A bull market is also described as a bull run. Dow Theory attempts to describe the character of these market movements. India's BSE SENSEX increased from 14000 points to 21000 points in a period of 1 year from Jan 2007 to Jan 2008. The United States was described as being in a long-term bull market from about 1983 to late 2007, with brief upsets including the Panic of 1987 and the NASDAQ crash of 2000-2002. Stagflation Stagflation is an economic illness wherein inflation combined with stagnation lock a society into slow-to-negative economic growth and rising unemployment, invariably including recession. When combined, the presence of both these factors is more than sufficient to launch an era of stagflation. For example, policies which promote growth in the money supply to allow consumers to afford higher priced oil contribute as a cause for runaway inflation, even if implemented to fight stagnation or recessions. The global stagflation of the 1970s is often blamed on both causes: it was started by a huge rise in oil prices, but then continued as central banks used excessively stimulative monetary policy to try to avoid the resulting recession and stagnation, causing a runaway wage-price spiral. The above definitions were taken from the Wikipedia free online encyclopaedia. New Fuel Tax Credits for Business - From 1 July 2008
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Activities |
Rates as at 1 July 2008 |
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Do you use fuel in heavy vehicles (with a GVM greater than 4.5 tonne) travelling on a public road? |
Claim this at 18.51 cents per litre* |
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Do you use fuel in specified activities such as agriculture, forestry, fishing, mining, marine and rail transport, electricity generation and non-fuel uses that have been eligible since 1 July 2006? |
Claim this at 38.143 cents per litre |
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(After 1 July 2008) |
Claim this at 19.0715 cents per litre** |
This means that under the expanded eligibility you can claim around $19 in fuel tax credits for every 100 litres of fuel you use in your business, even if you use it in machinery, plant or equipment such as:
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Get on Board
You will need to register to get the credits. LBW can assist you in doing this so please contact us if you wish us to do so.
See the ATO fact sheet on Fuel Tax Credits.
NSW Mortgage Stamp Duty Abolished!
Friday, 31 August 2007
OFFICE OF STATE REVENUE (OSR) ANNOUCEMENT
Duty on mortgages for owner occupied housing will be abolished on 1 September 2007.
Owner occupied housing
From 1 September 2007, mortgage duty will not be chargeable if the mortgage secures an advance or advances made for the purpose of owner occupied housing and no other advances. Borrowers must be natural persons.
Where the mortgagor is also a natural person, the mortgage can be registered without having to be stamped by OSR.
Investment housing
From 1 July 2008, mortgage duty is not chargeable if the mortgage secures an advance or advances made for the purpose of investment housing and no other advances. Borrowers must be natural persons.
No duty will be payable on any advances made on or after 1 July 2009.
Source:- NSW Office of State Revenue website
SUPER DAY - SIMPLIFIED SUPERANNUATION PASSES THE SENATE
The Minister for Revenue and Assistant Treasurer, Peter Dutton, today welcomed the passage of the Simplified Superannuation legislation through the Senate.
“These bills implement the greatest reforms to superannuation in Australia’s history. This is bedrock economic reform: sweeping away complex tax arrangements, improving incentives to work and save and increasing retirement incomes.”
“These reforms will empower Australians in saving for their retirement and help maintain Australia’s economic prosperity into the future.”
“It may have taken many, many months, but I am pleased that Labor has finally agreed to support this legislation,” Mr Dutton said.
Under the legislation, from 1 July 2007:
- Superannuation benefits paid from a taxed fund will be tax free for people aged 60 and over;
- Age based limits will be replaced with streamlined contribution rules and reasonable benefit limits (RBLs) will be abolished;
- The selfemployed will be able to claim a full deduction for personal contributions to superannuation.
- The highly successful Government co-contribution scheme will be extended to the self employed;
- To help improve incentives to save, the pension assets test taper rate will be halved to $1.50 per fortnight for every $1000 of assets above the assets test free area;
- Arrangements for lost and unclaimed superannuation will be enhanced;
- Individuals will have greater flexibility as to how and when to draw down on their superannuation in retirement.
As a result of these reforms, in the vast majority of cases, the 90 per cent of Australians in taxed schemes will have the tax treatment of their superannuation benefit covered in one paragraph of law if they access their superannuation after age 60.
Source: Treasury Press Release No. 015 - 27 Februray 2007
Simplified Superannuation - Treasury decides!
Wednesday, 6 September 2006
SIMPLIFIED SUPERANNUATION - FINAL DECISIONS
The Treasurer and Assistant Treasurer today [5 September 2006] announced the outcome of the Government’s consideration of the proposals outlined in A Plan to Simplify and Streamline Superannuation which was released as part of the 2006-07 Budget.
The Government undertook an extensive consultation process on the proposals in the plan. The Government received more than 1,500 written submissions and more than 3,500 phone calls from across the community. The Government thanks all individuals, businesses and organisations who participated in the consultation process.
The main proposal of the plan was to remove benefits tax from 1 July 2007 for Australians aged 60 and over who have already paid tax on their superannuation contributions and earnings. Other key changes proposed in the plan were:
- the abolition of reasonable benefit limits and age-based contribution limits;
- greater flexibility for individuals as to how and when they wish to draw on their superannuation in retirement;
- allowing the self-employed to claim a full deduction for their superannuation contributions and be eligible for the Government co-contribution for their personal post-tax contributions; and
- halving the current pension taper rate to $1.50 from 20 September 2007.
The Treasurer confirmed that the Government will proceed with these proposals which represent the most significant reform of the taxation of Australia’s superannuation system in decades. The changes will sweep away the current raft of complex tax arrangements, improve retirement incomes and increase incentives to work and save.
As a result of the consultation process transition arrangements will be put in place to make the transition to the new superannuation system easier, improve administration and improve the integrity of the superannuation system.
For further information please click here.
Source Treasury Press Release 2006 No 093
Employer's superannuation guarantee (SG) reporting requirements.
What are the new changes to super guarantee (SG) reporting requirements?
Employers will no longer have to provide employees with quarterly superannuation statements showing contributions made to super funds.
This means that employers may choose to report their superannuation contributions to em[ployees, but are no longer required by tax law to do so.
However, employers covered under Australian workplace legislation, awards or agreements that require them to report superannuation contributions on payslips will still be obligated to report to their employees.
There is no requirement for employers to cease reporting to employees and thus existing reporting arrangements may be retained.
What are the new changes to super guarantee (SG) reporting requirements?
The requirement for employers to report contributions will cease for all contributions made on or after 1 January 2005 . After this date, employers will not be required, under the new SG arrangements, to report to employees on employer superannuation contributions.
Will I still be notified regarding my employer??s SG contributions?
Superannuation funds will continue to issue annual member contribution statements. Many employees will, however, still receive information, in accordance with other Australian workplace legislation that requires reporting on payslips, and annual reporting from superannuation funds.
Will my employer still have to pay quarterly SG contributions on my behalf?
Employers will still be required to pay SG contributions on behalf of their eligible employees at least quarterly. The contributions are due by the 28th of the month following the end of each quarter.
NSW State Government to Abolish Vendor Tax -
2 August 2005
2.25% property duty to go
Property vendor duty will be abolished under the leadership of incoming NSW Premier Morris Iemma.
Mr Iemma made the announcement after being formally elected as the state's 40th premier at a Labor caucus meeting today. The 2.25 per cent vendor duty, introduced last year by then treasurer Michael Egan, applied to the sale of investment properties.
He said the new law would not be retrospective.
Mr Iemma will also become the state's next treasurer, when he is sworn in to both jobs tomorrow.
"I announce today that the vendor duty will be abolished," Mr Iemma told reporters. "[It will be] effective for all contracts exchanged on or after today."
"It's not a decision that I have taken lightly and it will have an impact on revenues."
Mr Iemma said the vendor duty was introduced in a very different property market and that times had changed. "A market that was stronger, but times have changed,'' he said.
"In the current market conditions, vendor duty is a break on economic activity.
"The Property Council and Access Economics have identified that the removal of the vendor duty will stimulate economic activity, it will have a positive psychological effect on business.
"I want NSW to be the state where investment is rewarded, not just the multi-million dollar investors, but the investors in my own electorate of Punchbowl, Lakemba and Wiley Park or investors in Kiama, Hornsby, Parkes and Penrith, Sutherland, Dorrigo and Deniliquin."
It has been criticised by investors, unions and the real estate and building industries, among others.
AAP
2005 State Budget Summary - 24 May 2005
Land tax
New Threshold Applies for 2006
For the 2006 land tax year a $330,000 threshold will apply to owners of liable land. There is no threshold for non-concessional companies and special trusts.
The land tax rate for 2006 will be 1.7 per cent (plus $100) on the unimproved value of the land in excess of $330,000. If your land tax liability is less than $100, no land tax will be payable.
Exemptions and concessions: There are no changes to the current land tax exemptions. The concession for non-income earning land, however, will cease after this year and will be unavailable in 2006.
The land tax liability for 2006 is based on all liable land owned as at midnight on 31 December 2005.
There have been no changes for 2005 ?? all liabilities remain payable.
Vendor duty
Changes to the definition of the vendor acquisition date for land-related property held by the vendor subject to a trust
Where land-related property is held by the vendor subject to a trust, the vendor acquisition date is the date on which a dutiable transaction in respect of that property was last chargeable with ad valorem duty.
This amendment applies to transactions entered into on or after 24 May 2005.
Land rich provisions
Disposer acquisition date for trustees of a trust
Where the disposer of an interest is the trustee of a trust, the disposer acquisition date is when the beneficial owners first became beneficially entitled to the interest being disposed of.
This amendment applies to transactions entered into on or after 24 May 2005.
Duty on refinancing loans
From 1 August 2005, the mortgage refinancing concession will be capped at $1 million. The concession will apply to the amount of the earlier loan or $1 million, whichever is the lower. Duty of $4 per $1,000 will be payable on the amount of any excess.
Note: this cap does not apply to refinancing land used for primary production or aquaculture.
Federal Treasurer Announcement - Child care rebate
Monday, 20 December 2004
The Federal Treasurer, the Honourable Peter Costello MP, today announced the following measure:
NEW EARLY START DATE FOR CHILD CARE REBATE
The Government will assist families further with the cost of child care by backdating the introduction of a new 30 per cent Child Care Rebate to 1 July 2004, enabling families to claim an extra six months of out-of-pocket costs.
As a consequence parents should keep all receipts for childcare paid in the current year.
The Government will work closely with child care providers to encourage them to provide an annual statement of child care expenses paid. This will assist parents in claiming their entitlement.
The Rebate will cover 30 per cent of out-of-pocket child care expenses, that is, fees paid for approved care less Child Care Benefit (CCB), for taxpayers who receive CCB and meet the CCB work/study/training test.
CCB is primarily claimed fortnightly through reduced child care fees based on an estimate of family adjusted taxable income. Centrelink then calculates the correct entitlement to CCB on an annual reconciliation once it has received child care usage data and the family??s annual adjusted taxable income when tax returns are lodged. This is usually before the end of November.
The correct amount of out-of-pocket child care expenses can only be calculated once the final reconciliation of CCB is completed. The 30 per cent Rebate will be claimed on the succeeding year??s tax return. This means that the Rebate entitlement for the 2004-05 year will be claimed in the return for the 2005-06 year.
This procedure will allow the calculation to be quick and avoid the complexity of trying to claim a rebate before the final amount of CCB is known.
In recognition that payment will be made in a subsequent year??s tax return, the start date for eligibility has been brought forward from 1 January 2005 as originally proposed to 1 July 2004.
The Child Care Rebate will be payable up to a maximum rebate of $4,000 per child. According to calculations of current usage and fees very few parents will hit this maximum level.
The Rebate is non-refundable, however to ensure families obtain the maximum benefit possible, taxpayers with insufficient tax liability to absorb the whole rebate will be given the option of transferring any unused amount to their spouse.
The Child Care Rebate will provide additional child care assistance to around 640,000 families with a total cost of around $1 billion over four years.
The Child Care Rebate builds on the current Child Care Benefit system, which is paid on the basis of a family??s income, the number of children in care and the type of care. Families using approved child care services and on the lowest incomes receive the highest rate of CCB.
Over the next few months, the Tax Office, Centrelink and the Department of Family and Community Services will work closely with approved child care providers to develop a package of information to help families claim the child care rebate.
NSW Mini-Budget AnnouncementsTuesday, 6 April 2004
The NSW Treasurer, the Honourable Michael Egan, today announced the following revenue measures in the mini-Budget:
First Home Plus
An increase in the thresholds for First Home Plus to $500,000 phasing out at $600,000 for the purchase of new or established dwellings anywhere in NSW and the increase in the threshold for the purchase of land anywhere in NSW to $300,000 phasing out at $450,000 effective from midnight on 3 April 2004.
Apart from the increases in thresholds, changes to the eligibility criteria for First Home Plus will be introduced with the legislation. These changes will more closely align the First Home Plus scheme with the eligibility criteria for the First Home Owner Grant scheme.
Vendor Transfer Duty
A Vendor Transfer Duty of 2.25% will apply to consideration received on the sale or disposal of property, other than on the sale or disposal of a principal place of residence or farm. Liable properties will be exempt from the duty where the vendor??s sale price or value on disposal does not exceed the purchase price or value on acquisition by more than 12%. This exemption phases out between 12% and 15%.
There will also be an exemption for the first sale by builders or developers of new dwellings. This will include ??off the plan?? sales.
Vendor Transfer Duty applies to liable contracts executed on or after 1 June 2004.
Transfer Rate of Duty
Increasing the marginal rate of purchaser transfer duty from 5.5% to 7.0% on that part of the purchase price of a residential property in excess of $3 million. This duty will replace the Premium Property Tax.
The increased rate of duty applies to liable contracts executed on or after 1 June 2004.
Premium Property Tax
Abolition of the Premium Property Tax from the 2005 tax year.
Land Tax
Abolition of the current land tax threshold effective from the 2005 land tax year.
Replacing the current single marginal rate of 1.7% with the following marginal rate scale:
u A land value of less than $400,000 will pay a land tax rate of 0.4%
u A land value of between $400,001 and $500,000 will pay a land tax rate of $1,600 plus 0.6% on the value of land above $400,000.
u A land value above $500,000 will pay a land tax rate of $2,200 plus 1.4% on the value of land above $500,000
The provision of relief from land tax where the amount of tax owed is less than $100.
Introduction of a deferral mechanism for low income earners with taxable properties below $300,000 in value that do not generate income.
Bank leaves interest rates at 5.25%
Homebuyers can breathe a sigh of relief after the Reserve Bank of Australia decided today to leave interest rates on hold for at least another month.
The cash rate will remain at 5.25 per cent, where it has been since the last interest rate rise in December, and the standard variable mortgage rate at 7.07 per cent.
The RBA does not release a statement when rates remain on hold.
Economists had expected the Reserve Bank to leave rates alone this month given the negative impact of the high Aussie dollar, signs of slowing in the housing market and continued weak exports.
However, most do expect interest rates to rise by 0.25 percentage points by the middle of the year as the Reserve Bank continues to move rates back into a neutral gear.
AAP
RBA hits pause button - No rate increase
The Reserve Bank left official interest rates unchanged on Wednesday for the first time since November, although economists suspect this is more likely to be a stay of execution than a full reprieve.
The RBA's market operations window at 9.30 am (AEDT) came and went with no policy announcement. The bank's board held its first meeting of the year on Tuesday. A rate change is normally announced the following day.
Unlike most other central banks, the RBA does not release a statement when it decides to leave interest rates unchanged. But the bank will make public its latest thinking in its quarterly policy statement next Monday.
"Presumably, the RBA would like a clearer steer on how the economy has started 2004 before moving again," said ICAP chief economist Ric Simes.
"Many analysts will start to factor in a rate rise for March, but the bank's quarterly statement will provide a clearer guide."
The decision to hold fire this month will be welcomed by the federal government, which has been pressuring the bank in recent weeks to leave rates alone.
The Reserve Bank tightened credit in November and December last year and is generally expected to move once more in the coming months, although there is disagreement in financial markets about the exact timing.
With housing starting to slow, the strong local currency squeezing exporters and inflation trending lower, most economists had expected the bank to sit pat this time.
"There is a clear case for the Reserve Bank to lift interest rates again. The bottom line is that interest rates are still too low in relation to Australia's strong economy," said Commonwealth Securities senior analyst Craig James.
Australia's cash rates of 5.25 per cent are already the highest among the world's top-rated sovereign borrowers. This sizeable margin has been a major influence on the outperformance of the Australian dollar in the past year.
RBA governor Ian Macfarlane has said the bank would like to return rates to "neutral" levels. In 2002, he identified neutrality as 5.5-6.0 per cent, although he has since said this is a "fuzzy" concept.
Source Australian Financial Review
2004: The year ahead for your business
Inside this special December/ January edition of Your Knowledge, we take a look at the year ahead and what are likely to be some of the key features of the business and taxation landscape.
Taxation
Personal income tax cuts
With an election looming, there is a possibility of a personal income tax cut in the New Year. It is also possible that any income tax cut will be followed by a revenue raising or protection measure.
Increased levels of ATO audit activity
Sophisticated data matching has seen the ATO match information provided to them against all manner of Government, regulatory and investment information. For example, matching the information declared on income tax returns against interest payments made by the banks. Anomalies will trigger either a ??please explain?? letter from the ATO or an audit.
For individuals, the ATOs key areas of concern are deductions for work related expenses and rental income.
For business, the ATO has well and truly moved from an educative approach to tax compliance to enforcement. For GST, the ATO are picking up a number of errors in the GST treatment of some transactions such as major purchases, car leases and financial supplies. But it??s not just GST that is coming under scrutiny. Capital Gains Tax is also coming under the spotlight and in particular, how the CGT concessions are being applied.
A major area of concern is the movement of money in and out of companies by shareholders and directors. In the past, companies have directed accumulated profits into the hands of directors or shareholders in the form of loans. These loans are created where there has been an advance made, personal expenses paid or by using company funds for private purposes. It is important to ensure that where these loans exist, that the loan is on commercial terms (in particular that there is a repayment schedule in place and interest is charged) and that there is a documented loan agreement. If not, the ATO can deem the loan to be an unfranked dividend. In other words, if you are a Shareholder with a company loan account (and the loan has not been properly documented) then the loan could be treated as income and you will be taxed on that income.
Superannuation
Self managed super funds
Self managed superannuation funds have become increasingly popular as people take control of their superannuation out of the hands of the large fund managers and into their own. Approximately 2,000 new funds are created in Australia every month.
With the increasing popularity of these funds also comes increasing levels of concern by the Australian Taxation Office over superannuation compliance and cost (the tax concessions for superannuation topped $10 billion in the 2002/ 2003 financial year).
A recent ATO benchmarking survey shows concerning levels of non-compliance by SMSFs. Key areas of non-compliance include investments by the fund not being at arms length (failing the ??sole purpose?? test), the lack of a clear investment strategy for the fund, a lack of documentation including minutes of the meetings of trustees, and a lack of awareness by trustees of their statutory obligation.
Areas of interest highlighted by the ATO for further investigation (read, likely to be audited) include:
? the fund??s assets included a linked trust;
? the fund had been in operation for more than 5 years;
? more than 50% of its assets were unlisted shares and/or equities;
? the fund was in the accumulation phase;
? the trustees were under 50 years of age; and
? the fund had total assets of $100,000 or more.
With ATO activity increasing in this area in 2004 it is essential to ensure that your fund meets its compliance obligations. The consequences of being deemed ??non-compliant?? are severe with non-compliant funds losing their concessional tax status.
Another area of review for Self Managed Super Funds is where expenses paid on behalf of a fund are claimed as a contribution. Although once common practice, a business cannot pay the expenses of a fund and then claim the expense as a contribution to the fund. The fund must pay its own expenses from its own bank account.
Superannuation Guarantee
The ATO will be checking to ensure that employers are meeting their quarterly superannuation guarantee obligations. They have also established a phone line where employees can ??dob in?? an employer who is failing to pay the adequate amount of super to employees.
The economy
Interest rates
Interest rates increased yet again this month (a total rise of 0.5% in the last three months) and economists are predicting another small rise in the first half of 2004. The Reserve Bank is tightening its policy to further tighten consumer spending. Loan approvals for housing have been so strong (defying expectations and rising by 1.6% in October and only just starting to taper off in November) that the banking and finance sector is currently reviewing ways to place stricter controls on loan documentation. As interest rates rise we can expect to see the Government and regulatory bodies taking a more active interest in the way finance is provided to consumers.
As we head into 2004, it is an ideal time to reassess the structure and cost of your business finance to ensure that you are in the best position possible. Review issues such as your growth plans and what funding you might require, capital investments required for 2004 and investment in stock.
The Australian dollar
Some economists are predicting that the Australian dollar will go as high as 77 cents to the US dollar in 2004. Most predict strong currency growth in the first half of the year and then a weakening in the second half.
Exports
The ratio of exports to imports is better than it has been in the last 26 years. This means that Australia currently has a reasonable alignment between imports versus exports.
The Australian dollar will continue to be a problem for some exporters (although our dollar has remained reasonably static against European currencies). The increase in interest rates will add further pressure as the cost of being in business goes up.
Federal election
The impending federal election is likely to have a dampening effect as Government slows spending in preparation for the next cycle of Government. The election will have the greatest impact on those with Federal Government contracts or who are waiting on contracts to come through. The good news is that there will be very little legislative or regulatory change in the first half of the year. However, you can expect the incoming Government to deliver any bad news or unpopular reforms in the first year of their term.
*Economic data provided by Westpac
Wishing you a very special 2004
From all of our team, we wish you a happy and safe Christmas and a peaceful New Year.
Quote of the month
??If you don??t like change, you??re going to like irrelevance even less.??
General Eric Shinseki, Chief of Staff, U.S. Army.
RBA increases interest rates - 5 November 2003
The RBA this morning increased interest rates to 5%, up 25 basis points (0.25%).
The RBA decision was based on:
International conditions improving: The US economy is strengthening and growth in Japan is higher than expected. Most of East Asia is experiencing improved conditions and China continues to grow rapidly. Financial market pricing embodies more optimism about growth, and economic forecasts are being revised upwards. The appreciation of the Australian dollar must be seen against that backdrop.
A pick up in the Australian economy: Having slowed under the weight of reduced exports and drought, the Australian economy is now picking up. Strong domestic demand appears to be the main factor so far, with both consumption and business investment growing strongly. Business surveys indicate unexpected strength in the non-farm economy in recent months, and the labour market is firming. The farm sector, as a result of improved rainfall, will experience better conditions over the next year. Hence growth is likely to be above trend through the coming year, and spare capacity in the economy will tend to decline. The housing market continues to be buoyant. The effect of the rise in house prices over recent years is likely to be expansionary for the economy in the period ahead, as higher wealth is accessed to support household spending.
Inflation rates steady: In the short term, these developments are unlikely to make for significant problems on CPI inflation. Indeed, it will most likely decline for a time, as the effects of the appreciation of the exchange rate show up in retail prices. Over a longer horizon, inflation is currently expected to be consistent with the target, but the risks to that forecast are beginning to tilt upwards.
Sustained period of growth: The prevailing stance of policy has been expansionary, as is clear not only from the current low level of nominal and real interest rates, but also from the behaviour of borrowers. Credit outstanding is rising at around 14 per cent per year, and at over 20 per cent to households. That is a much faster rate of growth than can be expected to be consistent with economic stability over the longer run. Short periods of rapid credit growth have not typically been a major concern for monetary policy, but this growth has been sustained for some time and at present shows no sign of abating.
The increase was not so much a matter of if but when.
Economists are predicting that we will see further increases of up to 1% through to the second half of next year.
For heavily geared clients, it will be important for them to review their current position and investigate fixed rate options.
Workers Compensation update [51 Kb]
New laws for Employers from 1 January 2010.
Friday, 18 December 2009
Australia will move much closer to a national industrial relations system on 1 January 2010, following the passage of legislation through the Federal Parliament on 2 December. All states except Western Australia have now referred their industrial relations powers to the Federal Government.
What does the national IR system mean for you and your business?
Once the national industrial relations system commences, The Fair Work Act 2009 will cover all businesses in NSW, VIC, TAS, SA, QLD, ACT, NT and all Pty Ltd companies in WA. It is essential that you understand your new legal obligations. This includes being prepared for the next wave of changes that will come into effect on 1 January 2010:
· the introduction of the new Modern Awards system and
· the 10 new National Employment Standards.
With the arrival of the new Modern Awards system your business may be bound by new provisions covering everything from hours of work to penalty rates. If you’re not meeting these new legal obligations you will be in breach of the law and hefty fines will apply, regardless of the size of your business.
The 10 National Employment Standards means there will be new minimum standards in place for all employees that include conditions such as parental leave, annual leave and redundancy pay obligations for businesses with 15 or more full-time equivalent employees. These will be in addition to all the other provisions contained in each new Modern Award.
So what steps should you be taking right now to prepare for 1 January 2010?
1. Develop a plan to implement the new processes to comply with the Act – particularly the 10 new National Employment Standards and the new rules relating to Unfair Dismissals which have already taken effect.
2. Check to see whether your business is covered by a new Modern Award.
3. Review and update your employment contracts, ensuring they comply with the requirements of the Fair Work Act.
4. Contact LBW & Partners to discuss how to easily manage all of your day to day employment issues to comply with current Australian employment law.
We can assist you to create compliant employment agreements in minutes, manage your staff with practical workplace policies and procedures and store/access secure employee information.
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