The Year Ahead

By Jason Fittler,

First let's recap history. 

In October 2007 he GFC started. The GFC was caused by loan defaults in the US, which lead on to debt securities owned by investors becoming worthless.

The size and scope were so large that it affected all major America Banks and investors globally as many global fund managers held these investments for their clients.

The GFC took until March 2009 to finally bottom, up until this point only investors had been affected. The value of their investments had fallen substantial and large capital losses were made.

However, Australian companies at large had not yet really started to cut costs, like always everyone was expecting and predicting a quick recovery. It was towards the end of 2009 when companies had to start to reduce expenses.

You may remember that the Government embarked on a massive spending program to try and keep the economy moving. This included the insulation bats, solar, cyclone cash, school building fund and one in 2008 when they just gave you $600, for most of us anyway.

Once these cash handouts stopped retail spending slowed.

Around the same time, the Carbon Tax and Mining Tax were coming into play and were introduced in July 2012. This truly put the brakes on the economy as the major miners now started to look globally for investments.

It was also around this time that our Iron Ore and Coal exports had peaked. Combine these things together and you have the perfect ingredients for an economic slowdown. 

Keep in mind that the economy is a big ship and it takes a long time to slow. But slow it has, and now all Australians are feeling the effects of the decisions made during the GFC.

Where are we right now?

High unemployment, record bankruptcies, slumped property prices and volatile stock markets.

Our Government is dysfunctional and unable to make the necessary changes to start to rebuild our economy.

However, interest rates are at an all time low, the exchange rate is around the $0.85 US which means support for our exports and the oil price is at a 6 year low which reduced household expenditure and expense for business. The Carbon Tax and Mining Tax have both been removed again reducing costs for business.

The next 12-months.

I keep hearing that the economy will recover in the next 6-18 months.

This is a load of rubbish.

What will happen is that the unemployment rate will stabilise. People will start to settle into the new economic norm. They will stop worrying about losing their job and will reduce their expenses and start once again to focus on the future instead of worrying about the now.

Our market will be flat, but I expect to see opportunities in the US and Europe especially as Europe slowly starts to recover over the next 3-5 years.

The government will clear the way for infrastructure spending and start to create jobs (this will not be a boom).

Interest rates will remain low and property prices will be steady or drop a little more.

Workplace reform will start as people will start to understand that it is better to be worried about losing a job then about trying to get one.

Oil prices will stay low, but this is another story.

And I expect the exchange rate will stay around these levels pending on our interest rate.

For the average Australian it is time to reduce debt and save money. It is not a time for increasing debt.

Our economic recovery is just about to start, but it will take time. 

In 5 years, we may start to see boom times again.   

Commonwealth Seniors Health Card (CSHC)

By Jason Fittler

The CSHC is a concession card for self-funded retirees of age pension age who are not eligible for the age pension.

It provides access to discounts on medical expenses and travel concessions, certain concessions provided by state and territory governments, as well as the Seniors Supplement - however (at the time of writing) a related 2014 Budget measure proposes to eliminate this payment to CSHC holders. 

To be eligible for the CSHC an individual must have adjusted taxable income below certain thresholds of singles, $51,500 and couples, $82,400 combined.

Recent Changes

Account-based pension (ABP) income from taxed superannuation funds paid to those aged 60 or over was, before 1 January 2015, not included in the income test for CSHC eligibility, because this income is not included in taxable income.

The new legislation applies deeming to ABPs for those aged 60 or more from 1 January 2015, in the same way, financial assets are deemed under the age pension income test, using the same thresholds and rates.

The key difference is that only the value of the ABP will be used to determine the deemed income - no other assets are included in this calculation.

To prevent double counting, ABP income received by a spouse under age 60 will not be deemed, as some or all of this income may be included as adjusted taxable income.

Under grandfathering arrangements, existing ABPs remain exempt where both the ABP and CSHC were held prior to 1 January 2015 and both continue to be held.

Guidance from the Department of Social Services indicates that the grandfathering provisions will continue where a pension reverts automatically to a reversionary beneficiary, provided at the time of reversion the beneficiary holds a CSHC.

Strategies to Obtain/Retain the CSHC

Existing ABP and CSHC holders should monitor their income levels during the year to ensure they stay below the relevant threshold. Once eligibility for the CSHC is lost, the grandfathering of an ABP is lost permanently. 

For new or existing cardholders in danger of breaching the thresholds, the following strategies may help to obtain/retain the CSHC:

Manage taxable income - consider restructuring investments that generate taxable income. Possible solutions could be to contribute to super (if eligible), invest in an insurance bond or family trust, or gift assets that generate taxable income to family members.

Reduce non-grandfathered ABP value - in the legislation, the expanded income test only includes deemed income received from ABPs for recipients aged 60 and over. It does not include super accumulation balances in this calculation. Moving pension funds back to accumulation phase may provide an opportunity to reduce deemed income.

Choose the income year - normally the previous year's notice of assessment is used to determine the adjusted taxable income of an applicant or cardholder. If this income exceeds the relevant threshold, there is the ability to apply to use an estimate of the current year's income. This is usually relevant where one-off events occur in the income year of application, such as retirement or the sale of an investment (in limited circumstances).

Of course, any change recommended would need to consider the client's overall needs and objectives. 

Please call us if you would like more information. (07) 4771 4577

Cloud Computing

Cloud computing, or something within the cloud, is an expression used to describe a variety of computing concepts that involve a large number of computers connected through a real-time communication networks such as the Internet.

In science, cloud computing is a synonym for distributed computing over a network, and means the ability to run a program or application on many connected computers at the same time.

The phrase also more commonly refers to network-based services, which appear to be provided by real server hardware, and are in fact served up by virtual hardware, simulated by software running on one or more real machines. Such virtual servers do not physically exist and can therefore be moved around and scaled up (or down) on the fly without affecting the end user - arguably, rather like a cloud.


Cloud computing is something most of us already use. Facebook is an example.

Instead of saving your data (pictures) on your home computer it is saved on a cloud based network. These are physical networks set up in data farms. A data farm is simply a warehouse full of computers, which you can access through the Internet. 

This sort of system means that you will no longer have to update your old desktop computer. All you will need is access to the Internet.

The cloud will save you costs in regards to having to buy new computers, updating software and the expense of having IT people coming to set up systems and repair problems. 

It is clear that the world is going this way and in the future cloud computing will be the norm. Most people you will barely notice the change as new deceives come out.

The downside to this technology:

  1. Costs
  2. Security
  3. Internet

Cloud computing is certainly the future of computing. We have little choice in this regard, however, there are downsides and small businesses should take note as this could affect you.

Investors need to realize that this technology will be very profitable in the long-term.

Not investing in data storage and cloud computing will indeed affect your overall return.

We will be watching closely for the best opportunities to be invested.

Interest Rates

By Jason Fittler

Interest rates are again in the news. A view is forming that interest rates will need to start heading back up again as the economy starts to improve.  

Interest rates are a tool which the Reserve Bank use to try to stimulate the economy. This can be highlighted by the below chart.

Unemployment increases is a clear sign that the economy is starting to struggle if you look at the below chart which covers a period from 2004 until 2013 you can see that before the GFC that interest were high and unemployment was low. This changed as a result of the GFC and according interest rates were cut to try to encourage business to borrow and kick the economy. 

The next chart looks at the correlation between lower interest rates and the issue of new building permits. What this clearly shows is although initially the interest rate cuts saw a spike in new building permits being issued it quickly corrected itself and moved back to the long-term average. As such lower interest rates seem to have little effect on construction.

Lower interest rates do however boost consumer and business confidence and normally see an improvement in the stock market.  

Retail sales tend to stay around the long-term average, however will be more volatile as generally times of low interest rates are also times of high unemployment as such there is less money available to spend. 

So what does this mean for interest rates going forward? 

I expect rates will stay low for longer as the economy still has some way to go before it has recovered. 

We are getting close to the bottom of the economic cycle as we see higher unemployment. 

The average person on the street is already or is about to go through the tough times along with small business. 

I agree that confidence is picking up but it will take time before confidence converts into jobs and profits.

USA Debt Ceiling

By Jason Fittler

At present the US is back in a situation where their debt ceiling needs to be increased.

The current debt ceiling is $16.7 Trillion, back in 1990 it was $3 Trillion by 2000 it was $6 trillion and by 2010 it was at $14.3 Trillion.

Since 1913 the US government has had to approve the debt ceiling. The debt ceiling is the amount up to which the US government can borrow.

Why this is a big issue? The US needs to borrow money to continue to pay for its reforms along with interest on current debt and all current government expenditure.

The Republican’s in the US see this as an opportunity to bring about spending reforms by cutting back on government expenditure, which they consider wasteful. The president however has a number of social reforms which he want to go through as such we have a stale mate.

The key date here is 17/10/2013, at which point the government will start to default on their debt obligations. To put this in terms the ordinary Australian can understand, it is like going back to the bank to borrow money to pay for expenses you have committed to but do not have the money to pay and the bank tells you no.

It could however simply be a storm in a tea cup as not to increase the debt ceiling will cause severe economic pain in the US as services need to start being cut. As such it is widely expected that an agreement will be reached around this date.

But this leads me to the bigger picture.

The US has been using Monterey policy to prop up their economy since the GFC. This activity has been undertaken by the Fed Reserve. The market has been speculating for some time as to when this process will slow or cease.

Back in April 2013 the chairman Ben Bernanke announced that they were considering slowing down Monterey policy, the market started to drop. It was not until May when the chairman corrected his April statements that the markets started to move up again.

The market is expected to fall once again when Monterey policy easing starts, the problem is no one knows when this will happen.

The current debt ceiling crisis for me is an indication that the government in the US need to change spending habits which leads into easing of monetary policy. I do not expect that this will happen in the short-term but if there is a ground zero I think this might be it.

Australia is not isolated on this issue, we also have a debt ceiling problem, which has been well flagged. Our current ceiling of $300 billion is also to be moved up to $350 billion shortly however I doubt we will have the same media coverage as the US. The new government has advised that this will be a short-term increase.

Australia I feel is ahead of the US as far as economic recovery. Our new government is clear that they will cut spending and focus on infrastructure spending which will in turn provide more jobs and build long-term efficiencies for our country.

The road back to surplus will be at least two terms of government but at least we are on the right road. The US is yet to make these changes but I expect it will happen at the next election.

I expect that the Australian market will pull back with the US; mainly due to international investors generally looking to exit all markets while the US get reset.

This would be short-term and provide a good opportunity to get spare cash into our market, which is looking a little fully valued at present.  

Quantitative Easing (QE)

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.

A central bank implements quantitative easing by buying specified amounts of financial assets from commercial banks and other private institutions, thus increasing the monetary base.

This is distinguished from the more usual policy of buying or selling government bonds in order to keep market interest rates at a specified target value.   

Below are Daniel Goulding comments on the current situation of the USA’s QE program.

When deflation is perceived to be the main threat by investors, stock prices (red line) are positively correlated with inflation expectations (black line) and bond yields (blue line) - as some inflation helps to shore up and increase earnings.

Now the sharp rise in bond yields since may 2011 has taken place against a backdrop of falling inflation expectations.

What does this mean? It discredits the notion that the rise in bond yields is a sign of strengthening economy (which is usually what it means). It could be simply attributable to the inevitable fed tapering (but I think this is only part of the reason). The bigger problem is that despite all the various QE programs, inflation expectations have essentially gone sideways over the past few years on balance – this means that the QE programs are losing their efficacy. The first place to look for liquidity problems is gold and that topped out two years.

My opinion: the rise in bond yields and fall in inflation expectations is in part due to potential fed tapering but the bigger driver is diminishing liquidity which will become apparent in the months ahead.

Age Care

Age care is something we will all come across in our life, either for our partner, parents, grandparents or ourselves.

It is a very confusing stage of life and quite complicated. Unfortunately usually when someone has to go into age care they do not have the capacity to understand the cost and charges and how they work. It is up to the spouse, child or grandchild to make the arrangements.

As you are dealing with other people’s money it is important to understand what is happening.

The first hurdle will be the accommodation bond, this is is usually paid when a resident permanently enters a low care or extra services high care aged care home, and the resident has more than $43,000 in assets.

The accommodation bond is an interest free loan from the resident to the aged care provider.

The aged care provider uses the interest earned from the accommodation bond monies to maintain their current building or to build new aged care homes for future residents.

There is no set level for the amount of the bond. The rule set out by the government provides that a resident must be left with at least $43,000 in assets. 

The amount of the bond needs to be negotiated between the family and the aged care operator. Given the general lack of available places in age care the family is generally in a tough position.

Be aware that the size of the bond can vary between age care facilities and residents in the same age care facility. The only rule is that the resident is left with $43,000.

There is no relation between the level of the bond paid and the level of the care provided once you have been admitted into the age care facility. There is no minimum bond level however the age care facility may request that you pay a minimum bond.

Daily care fees are the same whether you are a resident in a low-level or high-level care home.  

These fees have two components. (1) Basic daily care fees are based on the pension and are indexed and (2) Income tested daily care fees for residents with a higher income.

Aged Care Funding Instrument (ACFI) determines the level of financial assistance for personal care and lifestyle costs when a resident enters Commonwealth subsidised residential care.

The ACFI divides care into three categories and each category has three funded levels.

  1. Activities of Daily Living
  2. Behavioral Supplement
  3. Complex Health Care Supplement

Each of these areas is then broken down in the levels of care being low, medium and high. Depending on the level of care you require at each level will determine the amount of government subsidy you will receive. 

The subsidy paid to residential care provider is the lesser of the sum of the amounts payable in each level (activities of daily living, behaviour supplement and complex health care supplement) and the maximum ACFI rate, which is currently $181.21 per day.

The resident makes up any difference in the cost of the daily care fee or the facility can take a bond. 

Note: This is just a brief overview and you should consult a professional for more information.

Quantitative Easing (QE)

 By Jason Fittler

Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective.[1][2] A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, thus creating money and injecting a pre-determined quantity of money into the economy.

This is distinguished from the more usual policy of buying or selling government bonds to change money supply, in order to keep market interest rates at a specified target value.

The above definition comes from Wikipedia, for a more detailed explanation click here.

What this means is the Government prints money, most people do not understand how this affects the individual.  Without getting to technical on this issue and keeping it in very basic terms printing money is when the Governments central bank actually prints money to pay for things.

A simple explanation is that if the Government wants to build a new bridge they simply print some money and pay the workers with these funds for the cost of the bridge.

Although this sounds simple enough by doing this the value of the dollar is reduced.

This is because printing money will increase inflation, as there is now more money in circulation, which leads to more spending by consumers and a reduction of the goods available.

As more consumers compete for the goods that are available the price will go up, this is the basis of the free market.

At present, the central bank of America is currently employing this strategy. It seems to be working, as inflation has not got out of hand.

The affect on Australia is our dollar is now increasing against the US, as we are not employing the same strategy here. This is affecting Australia as our major exporters being the mining companies are now receiving less due from exports due to the higher exchange rate.

Over a long period of time this may cause a major slow down in Australia as miners shelve new projects and expansion.

The risk in America is that they print too much money and cause hyperinflation. This has happened a number of times in history in many countries. During periods of hyperinflation the cost of goods increase so quickly that your money becomes worthless.

Although printing money is a tool that governments use, it does affect the wealth of every citizen. If the government were to print 10% of the money supply in circulation, the value of your worth would decrease the same amount.  That is, $100 would now only buy $90 worth of goods.



The Cyprus bail out is an interesting story and although the size of it is quite small at 10 billion Euros ($12.5 billion dollars) it is how they have been forced to go about it which is of interest to the financial community.

The concern is what affect will this have on banks in Europe, will investors flee these banks just in case the same thing happens in their country? Will this cause a run-on the banks across Europe?

At the time of writing this the deal looked like this, there are two main banks in Cyprus one will be wound up the other will survive however investors in the banks including deposit accounts will lose all deposits above 100,000 Euros ($125,000). The extent is not only deposit holders but also bondholders, preference shareholders etc. This will affect the wealth of all depositors and investors in these banks.

To put in Australian term it would be like NAB and ANZ shutting overnight, all deposits lost all investments in these two banks lost. While the CBA and WBC were to survive but any saving you had over $125,000 is now gone. Add to this that if you have money in super you would hold shares in these banks as well, as such a major hit to your superannuation and saving at the same time. If like many Australians you fled to cash after the GFC for safety you are now worth $125,000.

How will or might this affect Australia:

We need to keep in mind that these measures have been forced upon the country by the International Monetary Fund (IMF) this is also the body responsible for the bail out of Greece, Spain Ireland and Portugal. This is where the concern is increased, will these sort of measures now become the norm for countries chasing bailouts in Europe?  

The issue is how will the citizens of these countries react to this news? How would you react to it? I suspect there reaction will not be much different to what you or I would do.

For now we will wait and see how this affects the world markets.

It is also a good time to remind investors that here in Australia the Government guarantees the first $250,000 of your investment in our banks. This is not per account, but per bank, as such if you are holding a lot of cash at present it makes good sense to spread it around the banks.

Make sure that you check first to make sure that the bank you are using is covered.

The below link will take you to a facts sheet about the guarantee scheme for large deposits and wholesale funding.

Fiscal Cliff

By Jason Fittler

With a last minute announcement the Fiscal Cliff was sorted... or so it would seem.

But there are still problems in the US that need to be addressed prior to seeing a Bull market return. All indications are that we should continue to be underweight in the US and that 2013 will see the volatility in the markets remain.

So what was fixed?

  1. One year extension of unemployment benefits
  2. One year freeze on scheduled cuts in doctors Medicare payments
  3. Five year extension on stimulus related spending cuts

The deal did not include.

  1. Any no entitlements reform
  2. Any restructuring of personal or corporate tax codes

What does this mean?

  1. Lower economic growth now expected, growth is not expected to get back to 2%.

2013 will continue to be a bumpy ride for investors as there are plenty of economic issues to work through in the US, Europe and at home. Given that the US and Australian governments have problems with their debt ceilings, you can expect that we will see further spending cuts.

It is clear that raising taxes will not be a future solution to government over spending. The Mining Tax in Australia seems to be proving this point.  

Unemployment, What Is It?

 By Jason Fittler

The unemployment rate fell from 5.3% to 5.2% last month.

So why is everyone crying foul of Campbell Newman? If unemployment is down then for every job lost, more than one was found.

There was in fact a decreased in the number of people unemployed by 13,900 so things are getting better… or are they?

The job participation rate fell from 65.2% to 65.1% which means that less people are now looking for work. This would include a number of self employed people in the construction industry who do not consider themselves unemployed even though they do not have any job on at present.

We can expect that a larger share of population, will consider themselves out of the work market. This will have the affect of distorting the figures.

Full-time employment decreased by 4200 jobs while part-time employment increased by 18,100 jobs. In real terms it means that the number of hours work has decreased which will correspond to a decrease in the take home pay. This will impact the spending patterns of the people affected.

When the Australian Bureau of Statistics (ABS) determine if you are employed they ask the following questions. If you were given a job today, could you start straight away? Have you taken active steps to look for work? If you answer no then you are considered employed.

If someone is on maternity leave they would therefore be considered employed. It is interesting to note that the ABS unemployment figures are not the same as the data that Centrelink collects on the number of people receiving unemployment benefits. As such you could be on unemployment benefits but considered employed.

If you are under age 22 you are not entitled to receive Newstart Allowance. As such you would not be included as unemployed.

Perhaps what we should be looking at is the under-utilised Labor rate, this is the percentage of the population who would like to do more work if available.

I was unable to obtain the figures for 2012, but back in 2011, for woman it was 12.8% and for men 8.9% at the same time the unemployment rate was for women 4.4% and men 4%.

I would expect that the under-utilised Labor rate would be much higher now given the increase in part-time work and the loss of full-time work.

What does this all mean?

The devil is always in the detail. Although the headline figure looks like things are improving, the reality is that people are working less hours, taking home less money and more have given up trying to find work.

This will lead in the short-term to less retail spending and a slowdown in our economy.

Things are getting tough for the individual and household budget, you can expect them to get tougher yet.


What is a Fiscal Cliff?

By Jason Fittler

The term “fiscal cliff” is used to describe several big fiscal events set to occur in the U.S. at the end of this year and in early 2013.

Among them:

  • The expiration of the Bush-era tax cuts at the end of 2012, including current lower tax rates on capital gains, dividends, income, and estates, as well as number of other measures.
  • The expiration of fiscal stimulus measures, such as the payroll tax cut and extended unemployment benefits.
  • Spending cuts scheduled to be triggered automatically in January 2013 as a result of the failure of the deficit reduction super committee last year.

Depending on estimates, the impact of all these actions taken together would be a fiscal shock on the order of $300 billion to $600 billion in just one year.

Such policies would reduce the budget deficit and begin to address the nation’s increasingly worrisome debt situation. However, economists generally agree that allowing the fiscal cliff to take effect in full, at the same time, could have a substantially negative impact on the economy in 2013.

The timing of these changes also coincides with the US election being held on the 06/11/2012, putting the issue in the hands of a new administration and Congress. In my view this will have an affect on the market in the short-term.

At present we are expecting that the market will pull back as we head towards the end of the year the “Fiscal Cliff” is one of the major fundamental issues which will affect the market.

I expect that this issue will most likely be deferred once the election is over to give some breathing space.

The concern will be around how tight the election will be.

To me this indicates that the US market is set to pull back as investors look to sit on the side lines and wait to see the results.

This will have an effect on the Australian markets and points to a pullback we have been expecting.

The Grow Your Wealth Cycling Team - Pluma Push

Three of the BAMRacing-Grow Your Wealth team mounted up for the Pluma Push last weekend.

Once again they proved hard work and team work will produce results.

Scott, Gary and Ruth all completed the 70 km mountain bike race in very respectable times.

So far this year the team has taken out all three Criterium races and achieved first and second place in the Time Trail.

If you would like to see the team click on the below link and it will take you to the team web site.

Personally, I completed the 42 km recreational course of the Pluma Push… I would not say the time was respectable but I did finish in the first 100 of 550.

Market Performance 2012

By Jason Fittler

The general feel for 2012 from investors is of underperformance. However, as we take a look at the year that was you will see that this is not entirely true for the Australian market.

The ASX 200 started the year at 4607 and closed at 4168 which is a drop of 9.5% for the year, however, this figure only take into consideration gains or losses on capital value and does not look at income.

When we look at the ASX200 Accumulation index which assumes that you have re-invested all of the dividends back into the market we see a gain of 2.5%. That's right a gain.

Which means that the strategy of buy blue chip companies, hold for the dividend and long-term growth has worked again this year.

Sure 2.5% is not a lot but look at it his way, we hold quality companies and like quality property will always grow over time, therefore the companies in the ASX200 have provided fantastic income. Far more than cash or term deposits.

As long as companies can continue to produce good profits in any markets then long-term you will see large capital gains. I think that the ASX 200 proved this again this year.

What we also saw was during the year the market fell below 4000 points no less than 6 times. This to me is a clear indicator that the bottom is in, as there is plenty of cash around to buy up at these low prices.

On comparison the US markets closed up around 2.4%. Although they suffered losses in the first quarter we saw consistent growth in the US from October 2011 onwards.

Germany was down around 1000 points or 13.5% for the year. Germany is the better performer in the Euro Zone. It is no surprise to anyone that Europe did not perform well in 2012 nor do I expect improvement in the coming year.

The positive takeaway is that the issue in Europe is understood and under control.

We saw interest Rates fall 1.25% to the current level of 3.5% with strong encouragement from the government. However, we are now in what I consider to be dangerously low interest rates. Once interest rate fall below 4% there is little flow on benefits from future rate cuts as such momentary policy becomes less effective.

Australians need to use this dip to pay off debt as I expect to see rates increase in the next 2 years.

Also note that is a negative for all of those investors sitting in cash as your income has now decreased. I expect that these low rates will see investors start to move back into the market over the coming year. We have already seen bond prices jump.

Exchange Rates started year around $1.08 and finished at $1.025. It dipped below $1 for a short time and I expect it will go lower in the coming 12 months. I expect that the dollar should be around $0.90.

Gold price was steady over the year although still sitting at historic highs up around $1600 an ounce. It closed up around $100 an ounce for the year on speculation that investors are looking for safety in the precious metal while the market is so volatile.

My prediction for 2013 is more of the same as Australia comes to grip with the costs of the Carbon Tax.

  • I expect we will see unemployment move up as companies and government rationalise.
  • Interest rates may fall another 50 bps but that should be the last of it.
  • Exchange rate to move under the $1 mark.
  • The market will continue to be volatile on any bad news flow... providing opportunities to buy blue chip companies cheap.

I will continue to invest in high yielding blue chip companies and wait for the capital growth while enjoying the benefits income brings.

Small Business Clearing House

By Jason Fittler

If you are a small business and have fewer than 20 employees then read on.

Running a small business is all about time efficiencies. As a small business owner you are required to make super contributions on behalf of your employees. You are also required to offer all of your employees a choice of super. This means in effect you might have to make 20 super payments to 20 different super funds each month or quarter.

This is a very time consuming job. To make life simple and save you money, register on the Small Business Superannuation Clearing House. This is a Government service run through Medicare, which provides small business access to a clearing house free of charge.

It allows you the ability to log on to one web site and pay all of your employee’s super contributions at the same time. The best part is that it is quick and simply to use. The process is as follows:

1. Go to the below web site and register. They will email you out a log in and password.
2. Log in and put in your employee’s details, most of it is basic information such as name, address and date of birth. You also need to enter the employees Super Indemnification Number and the employees super account number.
3. Once all employees are entered go to pay super contributions, put in the period for the contributions and a list of employees will appear. Put in details of how much is to be paid to each employee and then submit, check and submit again.

The system will then provide you with Bpay details and EFT details. Chose your method of payment and pay.

Once set up it will take you no longer then 10 minutes to pay all of your super contributions. The best part is the date you submit the payments through Small Business Superannuation Clearing House is the date it is taken as paid, not the date that the super fund receives the funds. No more worry about making the payment by the 28th day after the end of the quarter.

This is truly a great service and I would encourage all small business owners to take a look and use this service.

Property Forecast to Fall

By Jason Fittler

Below is an article regards property in Australia written by David Collyer.

Given the current economic conditions I feel he is on the money with this view. 

Imminent Recession Forecast By Kavanagh-Putland Index

Posted on Wednesday, October 26th, 2011   

Author: David Collyer   

Melbourne:- The Kavanagh-Putland Index, which examines the ratio of property sales to GDP, has fallen to a 12-year low. A fall in market turnover precedes a fall in land values by one to two quarters, which then foreshadows recession.

“The ratio of property sales to GDP has suffered its biggest year-on-year fall since the recession we ‘had to have’,” Dr Gavin Putland of the Land Values Research Group said yesterday. According to the precedents, “there will be recession in 2011-12.”

“The recession will be quite severe due to our very high debt burden and the fact the housing market was more overvalued in 2010 than at any other time in the last 41 years.

In 2010-11, the index fell by the third biggest percentage on record. The biggest fall was in 1974, which preceded the 1975 recession. The second biggest was in 1989-90, and was followed by recession in 1990-91. The fourth biggest was in 1981-82, which was a recession year, and was followed by a worse recession in 1982-3.

On the basis of sales figures for the second half of 2008, the fall in the index for 2008-9 was initially expected to be very large – perhaps worse than in 1989-90. However, the First Home Owners’ Boost persuaded many potential buyers to purchase, so the actual fall in the index was smaller than in 1981-2. A standstill in borrowing that would have led to recession — as happened in so many other countries — was averted for the time being.

It is twenty years since Bryan Kavanagh started calculating the total annual value of property sales in Australia, using records dating back to 1972.

It is ten years since he first published this measure that shows when a downturn in property prices would cause a recession. The index now comprises forty years of data.

Dr Putland said that governments can, but won’t, act to avoid recession. “They need to cut taxes on current income or expenditure, so that people can more easily service their current debts, and replace the revenue by increasing taxation of capital gains, so that people have less incentive to borrow and speculate in future.”

“Governments just don’t do that sort of thing,” Dr Putland concluded.

Commonwealth Seniors Health Card

By Jason Fittler

Are you over age 60?

An Australian resident living in Australia?

Are you over pension age but do not qualify for an age pension?

Is your income below $50,000 if you are single or $80,000 if you are a couple?

Then you may qualify for a Senior Health Card which will provide you discounts for all of your medical needs. If you are not sure then contact Centre link and find out.

Please note, if you are receiving an Account based pension from your super fund it does not form part of your taxable income so you may still qualify.

For more information please call us on 4771 4577.

Recession – What Does it Mean.

By Jason Fittler

Recession is the new media hype; our office has been calling it since 2009.

"Australia from my perspective is in a recession, for long-term investors this means you need to focus on making sure you are holding blue chip stocks paying a high dividend yield. At the same time keep an eye on the growth stocks and maintain some exposure as once the recession’s starts to break these stocks will be very profitable."

There are many definitions of a recession depending on who you are talking to, a common agreement is two negative periods of GDP is considered a recession.

In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way. Production, as measured by gross domestic product (GDP), employment, investment spending, capacity utilization, household incomes, business profits, and inflation all fall, while bankruptcies and the unemployment rate rise.

Recessions generally occur when there is a widespread drop in spending, often following an adverse supply shock or the bursting of an economic bubble. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation.

Some recessions have been anticipated by stock market declines. Ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months), while ten stock market declines of greater than 10% in the Dow Jones Industrial Average were not followed by a recession.

The real-estate market also usually weakens before a recession.  However real-estate declines can last much longer than recessions. During an economic decline, high yield stocks such as fast moving consumer goods, pharmaceuticals, and tobacco tend to hold up better.

However when the economy starts to recover and the bottom of the market has passed, growth stocks tend to recover faster.

There is significant disagreement about how health care and utilities tend to recover.

Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S. may also be affected by a recession in the U.S.

There is a view termed the halfway rule according to which investors start discounting an economic recovery about halfway through a recession. In the 16 U.S. recessions since 1919, the average length has been 13 months, although the recent recessions have been shorter. Thus if the 2008 recession followed the average, the downturn in the stock market would have bottomed around November 2008. The actual US stock market bottom of the 2008 recession was in March 2009.

Most mainstream economists believe that recessions are caused by inadequate aggregate demand in the economy, and favor the use of expansionary macroeconomic policy during recessions. Strategies favored for moving an economy out of a recession vary depending on which economic school the policymakers follow. Monetarists would favor the use of expansionary monetary policy, while Keynesian economists may advocate increased government spending to spark economic growth.

 Supply-side economists may suggest tax cuts to promote business capital investment. When interest rates reach the boundary of an interest rate of zero percent conventional monetary policy can no longer be used and government must use other measures to stimulate recovery. Keynesians argue that fiscal policy, tax cuts or increased government spending, will work when monetary policy fails. Spending is more effective because of its larger multiplier but tax cuts take effect faster.

Australia from my perspective is in a recession, for long-term investors this means you need to focus on making sure you are holding blue chip stocks paying a high dividend yield.

At the same time keep an eye on the growth stocks and maintain some exposure as once the recession’s starts to break these stocks will be very profitable.

Real Estate prices will fall as it becomes harder to obtain credit, as business owner’s focus on reducing business debt as opposed to lifestyle changes and households start to feel the pinch of increases expenses.  

Regardless of how much the Government tries to talk up the economy the tough times are still to come for us individuals.

For investors now is the time to buy those investments, which will provide you with the wealth in the long term being 3-5 years.