After all the pre-budget ‘discussions' about taxes, especially around superannuation, capital gains and negative gearing, it all fizzled out to not a lot.
Despite the fact that the budget had little impact on property investors, we still need to keep up to date with economic news. And the nearly 200 attendees at our most recent Multifocus Properties & Finance evening got a spirited and powerful lesson from one of Australia’s favourite economists, Commsec’s Craig James.
Craig’s presentation was a breath of fresh air! He explained key aspects of our economy and that Australia is actually doing well despite all the negative media coverage and politicians' constant doom and gloom rhetoric. “Why don’t we say that we have a 94% employment rate rather than a 6% unemployment rate? Sounds a lot better, doesn’t it?” His optimism
and great speaker skills certainly contributed to the interested mood of the audience. He also pointed out that the long-term average unemployment rate is 5.5%, so we are not too far off the average, it is nowhere near a disaster…
Craig explained that, sure enough the Australian economy could do better, it is not growing fast enough, productivity could improve, but we are still spending above the decade average, luxury cars sales are still increasing, construction is booming, net wealth creation is positive, and petrol prices are falling – did you know that our biggest weekly purchase is petrol? Also wage growth is covering inflation, we have not had a recession in 23 years, and interest rates are at a historic low. So what is the missing ingredient? In one word: confidence! If we could get past the political uncertainties, the constantly pessimistic media coverage, we would be lifting our productivity a lot higher. Craig certainly gave a confidence boost to our 200 attendees!
And now post-budget confidence is increasing too, so maybe we are onto something now…
For my part of the presentation, I concentrated on how we should use the current economic environment to secure our financial future. With our life expectancy constantly getting longer, the old premise that $1m in super will be sufficient is no longer true. Even the Week End Australian Financial Review ran a special feature on the subject in early May suggesting that $2m is closer to the mark.
Considering that well over 80% of Australians are on a government pension, and this means receiving about $21k per annum, if we want to be part of the other 20%, now is an ideal time to take action, or as Joe Hockey puts it: “have a go!”
Of course it is not about being reckless with our money. Although today provides us with a favourable interest rate environment and good real estate growth, it’s all about the longer term. “Have a go” comes with more risk than just keeping our savings in a bank account. But it also comes with much greater capacity for rewards with a sound strategy AND a comprehensive risk management plan. This is where property comes in as an attractive asset class. It is a very forgiving investment, with low volatility, a proven track record, it is tangible and has a great long term outlook. Don’t get me wrong, there is nothing wrong with shares or bonds, but the key is really about making sure you feel comfortable with your strategy, and I hope that I conveyed this message clearly during the evening.
I enjoyed having the chance to mingle with attendees after the presentations, and what struck me most was the keen thirst for knowledge about what makes a good investment now and in the future.
It was not a case of “should I?” but “how and where?”
If you also have a thirst for more knowledge, go to www.multifocus.com.au for video coverage of the event.
Philippe Brach is CEO of Multifocus Properties and Finance
Disclaimer: while due care is taken, the viewpoints expressed by contributors do not necessarily reflect the opinions of Your Investment Property
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