Provision Newsletter

At its meeting today, the Board decided to lower the cash rate by 25 basis points to 1.25 per cent. The Board took this decision to support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.

The outlook for the global economy remains reasonable, although the downside risks stemming from the trade disputes have increased. Growth in international trade remains weak and the increased uncertainty is affecting investment intentions in a number of countries. In China, the authorities have taken steps to support the economy, while addressing risks in the financial system. In most advanced economies, inflation remains subdued, unemployment rates are low and wages growth has picked up.

Global financial conditions remain accommodative. Long-term bond yields and risk premiums are low. In Australia, long-term bond yields are at historically low levels. Bank funding costs have also declined further, with money-market spreads having fully reversed the increases that took place last year. The Australian dollar has depreciated a little over the past few months and is at the low end of its narrow range of recent times.

The central scenario remains for the Australian economy to grow by around 2¾ per cent in 2019 and 2020. This outlook is supported by increased investment in infrastructure and a pick-up in activity in the resources sector, partly in response to an increase in the prices of Australia’s exports. The main domestic uncertainty continues to be the outlook for household consumption, which is being affected by a protracted period of low income growth and declining housing prices. Some pick-up in growth in household disposable income is expected and this should support consumption.

Employment growth has been strong over the past year, labour force participation has been increasing, the vacancy rate remains high and there are reports of skills shortages in some areas. Despite these developments, there has been little further inroads into the spare capacity in the labour market of late. The unemployment rate had been steady at around 5 per cent for some months, but ticked up to 5.2 per cent in April. The strong employment growth over the past year or so has led to a pick-up in wages growth in the private sector, although overall wages growth remains low. A further gradual lift in wages growth is expected and this would be a welcome development. Taken together, these labour market outcomes suggest that the Australian economy can sustain a lower rate of unemployment.

The recent inflation outcomes have been lower than expected and suggest subdued inflationary pressures across much of the economy. Inflation is still however anticipated to pick up, and will be boosted in the June quarter by increases in petrol prices. The central scenario remains for underlying inflation to be 1¾ per cent this year, 2 per cent in 2020 and a little higher after that.

The adjustment in established housing markets is continuing, after the earlier large run-up in prices in some cities. Conditions remain soft, although in some markets the rate of price decline has slowed and auction clearance rates have increased. Growth in housing credit has also stabilised recently. Credit conditions have been tightened and the demand for credit by investors has been subdued for some time. Mortgage rates remain low and there is strong competition for borrowers of high credit quality.

Today’s decision to lower the cash rate will help make further inroads into the spare capacity in the economy. It will assist with faster progress in reducing unemployment and achieve more assured progress towards the inflation target. The Board will continue to monitor developments in the labour market closely and adjust monetary policy to support sustainable growth in the economy and the achievement of the inflation target over time.

Source: Reserve Bank of Australia, June 4th, 2019

Enquiries

Media and Communications
Secretary’s Department
Reserve Bank of Australia
SYDNEY

Phone: +61 2 9551 9720
Fax: +61 2 9551 8033

Email: rbainfo@rba.gov.au

Decide how you want to be looked after if you can’t make your own decisions and how you want your assets to be distributed after you die.

What is estate planning?

If you’ve got people in your life who you love and want to take care of, it’s wise to build an estate plan. This plan, which you can put together with the help of an estate planning specialist, will make sure loved ones are taken care of in the event of your death.

An estate plan is more than just drawing up a will. It also involves formalising how you want to be looked after (medically and financially) if something happens to you, or if you’re unable to make your own decisions later in life. Your estate plan will also clarify how you want your assets to be protected during your lifetime and distributed after your death.

How does an estate plan help?

You can make your wishes known

One of the benefits of a sound estate plan is the ability to formalise your wishes in writing. This can help if someone contests what you’ve said you want after you’ve passed away, or if you’re unable to speak for yourself.

You could minimise disagreements

Unfortunately, disputes often arise when unsettled assets need to be distributed among others—especially if there are no clear guidelines set. Being prepared with an estate plan could go a long way in preventing disputes should family members need to divide assets among themselves or make other hard decisions on your behalf.

You may improve tax consequences for your heirs

As the distribution of assets (including your income) can come with different tax obligations, a good estate plan might also minimise any tax that your heirs would need to pay. For instance, if they decide to sell something they’ve inherited, depending on the type of asset, they may need to pay capital gains tax. Estate planning, particularly with the guidance of estate planning specialists, could reduce these extra tax costs.

Key points when creating your estate plan

Consider drawing up a will and whether you want something legally binding

A solicitor or estate planning lawyer can help you draw up a will that is legally binding and covers what you’d like to happen with your assets, children (if you have any) and funeral when you die.

It’s important this document is kept up to date, and be sure any changes to your situation (marriage, divorce, separation or otherwise) are accounted for, so those who matter most are taken care of.

While it’s also possible to draw up your own will (there are various kits available online), these may not be adequate in complex situations, which is why engaging a professional is still worthwhile.

A word of warning: if your will is deemed invalid, your estate will be distributed according to the law in your state (which may not align with your wishes), and claims could be made by unintended recipients. This is why it’s a good idea to enlist the services of an estate planning specialist, even if you think your situation is relatively simple.

Review your nominated beneficiaries for any super or insurance you might have

When it comes to your super, you’ll need to do some planning in advance to make sure it’s distributed properly in the event of your passing.

During this process, take the time to nominate your beneficiaries with your super fund, and make sure you’re across how long different nominations are valid for. If you don’t make a nomination, the super fund trustee could use their discretion to determine who your super money goes to.

In addition, if you have insurance outside of super, make sure you’ve listed your beneficiaries on your insurance policy and that those beneficiaries are also kept up to date.

Consider appointing an enduring power of attorney to make decisions if you can’t

There may come a time when you’re unable to make legal or financial decisions on your own because of advanced age or medical issues. Granting power of attorney means you are designating an individual to make these decisions on your behalf if such a scenario arises.

For this reason, it’s important to choose someone you trust, as they’ll be responsible for looking after your bank accounts, ongoing bills, and even selling your house if you need to move into a care facility.

It’s also worth noting that you may be able to appoint a different type of power of attorney depending on what tasks you’d like this person to carry out on your behalf. For example, you may want your son or daughter to make general lifestyle decisions for you, while you appoint a financial adviser to make financial decisions.

Choose an executor to help carry out your wishes when you’re gone

Generally, an executor is the legal individual who manages and distributes the estate with the assistance of a solicitor, according to the terms you’ve set out in your will (which your solicitor should have a copy of).

When you nominate an executor in your will it’s important to let your family know, to avoid disputes after you die. Make sure the executor also has a good understanding of their duties and where your will and other important documents are kept. You may also want to let your family know where this information is stored.

The executor will typically be responsible for things like making funeral arrangements, ensuring your debts are paid and bank accounts closed, and collecting any life insurance.

They will also usually need to apply to the court for a grant of probate, which is a required legal step before your estate can be distributed. A grant of probate certifies that your will is valid.

Do you need help planning your estate?

Estate planning can be a complex process, and there could be legal and tax implications if you don’t set things up correctly and understand the fine print.

For these reasons, it’s very important to speak to a legal professional and your financial adviser before making any decisions and signing on any dotted lines.

For more information speak to us on |PHONE| .

Source : AMP May 2019 

Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling |PHONE|, before deciding what’s right for you.

All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person.

Like any new chapter in your life, preparation can go a long way in ensuring you’re emotionally and financially ready for the road ahead.

Despite the obvious benefits, only 44% of Australians over age 40 feel prepared for retirement1. That’s why we’ve pulled together a nine-point retirement planning checklist to help make sure you’re on the front foot when it comes to financial planning for retirement.

1. Do I have to retire by a certain age?

The retirement age in Australia isn’t set in stone. You can retire whenever you want to, but your health, financial situation, employment opportunities, individual preferences, superannuation plans and partner’s needs could play a big part.

2. How much money will I need for retirement and where will I get it?

Saving for retirement can help you prepare financially for the future. Industry figures show that individuals and couples around age 65 who are looking to retire today need an annual budget of $43,317 and $60,977 respectively to fund a comfortable lifestyle (assuming they own their home outright and are in relatively good health)2.

To live a modest lifestyle in retirement, which is considered better than living on the age pension, an individual would need an annual budget of $27,648, and a couple an annual budget of $39,7753.

These figures are helpful when thinking of retirement planning strategies. Think about how you want to live your life in retirement and add up any potential income sources you may have to support yourself. This could include things such as a superannuation fund, government entitlements, investments, savings or an expected inheritance.

3. What recreational activities are on my to-do list?

When you retire, you’ll likely have more time for the things you enjoy most. Australians are living and remaining active for a lot longer – in your financial planning for retirement,  spare a thought for your physical and mental wellbeing, and whether you’ll need a bit of extra money to do the things you enjoy, such as various sports and hobbies, travel and eating out.

4. How and when will I access my super?

Your superannuation plan can make a big difference to your financial planning for retirement, so it’s handy to have an idea of when you can (and will) access your super.

Generally, you can start accessing super when you reach your preservation age, which will be between 55 and 60, depending on when you were born. As for what you do with your super—which from age 60 is typically accessible tax free—you’ll have a few options.

If you want more financial flexibility, you could access a portion of your super balance via a transition to retirement pension (TTR), while continuing to work full-time, part-time or casually.

Alternatively, if you want to retire, you can choose to take your super as a lump sum, or move it into an account-based pension or annuity, if you want a regular income stream. There will be different tax implications for different people, and your super doesn’t guarantee an income for life, so it can be valuable to seek professional advice on superannuation.

5. Will I be eligible for government entitlements?

If you’re thinking about retirement planning in Australia, there are some government payments that you may be eligible for. Along with your savings, government benefits, such as the age pension, Carer’s Allowance and Disability Support Pension, could be an important part of your retirement income.

6. Will I be entering retirement debt-free?

An AMP.NATSEM report found nearly four in five people aged 50 to 65 have household debt4. When planning retirement, you may want to consider if you’ll be carrying debt into retirement, and think about ways to reduce it sooner rather than later.

Some things that could help reduce debt:

1. Work out your debts and what they total

2. Do a comparison of what you earn, owe and spend

3. Look into whether you might benefit from rolling your debts into one

4. Pay your debts on time to avoid additional charges

5. Try to pay the full amount rather than the minimum owing

6. Look at whether you can afford to make extra repayments

7. Shop around for providers with lower interest rates and no annual fee.

7. Do I have other matters that need addressing?

• Insurance – You might have insurance, but it’s worth checking you have the right type and enough of it for your retirement planning. After all, what you require in retirement could be quite different to when you are working.

• Investment preferences – Investments are part of many retirement planning strategies, and when you’re retiring, it’s worth reviewing your investment style and the options you’ve chosen. In retirement, you might also consider a more conservative approach, as when you’re younger you generally have more time to ride out market highs and lows.

• Estate planning – On top of that, think about your estate planning needs. Have you documented how you want your assets to be distributed after you’re gone and how you want to be looked after if you can’t make decisions later in life?

8. Will I relocate or downsize?

Your living arrangements in retirement should be based on more than just your finances. Your health, partner, family and what activities you decide to pursue once you stop work will all play a part.

If you’re thinking of downsizing to release money from your property, planning ahead can help you feel more in control and provide greater peace of mind as you can assess any out-of-pocket costs in advance.

9. Do I want to make any final super contributions?

The more you can put into super before retiring, the more money you’re likely to have when you retire. And, if you invest some of your before-tax income into super (known as salary sacrifice), these amounts will generally be taxed at 15%, which is lower than the tax most people pay on their employment income. Keep in mind that even if you’re 65 or over, you may still be able to continue to make contributions to your super to fund your future retirement as well.

Whatever your goals and future plans happen to be, remember that even a little bit of planning today could go a long way tomorrow.

Please contact us on |PHONE| if you seek further assistance on this topic .

Source : AMP May 2019

Important:
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling |PHONE|, before deciding what’s right for you.

All information in this article is subject to change without notice. Although the information is from sources considered reliable, AMP and our company do not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP and our company do not accept any liability for any resulting loss or damage of the reader or any other person

With thousands of charities competing for your donation, it’s important to do some research to make sure your money is being used for the cause you want to support. It is also essential to make sure the charity is actually receiving your donation.

Here are some things to think about before you donate.

Choosing a charity

Your decision to support one charity over another is usually based on your interest in the cause the charity supports. You may also choose a charity as a way of remembering a deceased relative or friend. Whatever your motivation, it’s important to make sure you are comfortable with the charity’s activities and how it plans to use the donations it receives. 

Donating directly to an overseas-based charity can be risky as it may be difficult to verify the information found on websites or social media sites. 

You may prefer to donate to an Australian charity that supports the cause or project you’re interested in. Many Australian charities operate overseas but are based in Australia.

Ways to donate

There are a number of ways you can donate.

One-off or ongoing

You may decide to make a regular, set donation or you may prefer making a one-off donation following a particular fundraising campaign or an urgent need, like a natural disaster. Sometimes a charity will approach you directly for a cash donation or to participate in a fundraiser such as a raffle. This can happen on the street, over the phone or at your front door. 

Workplace giving

You can also support a charity through automatic deductions from your salary. If your employer has a workplace giving scheme your donation can be deducted from your pay and sent directly to your preferred charity. 

You will gain tax benefits at the time of donation and receive a summary of payment at the end of the year.

To participate in any workplace giving program, the charity must have deductible gift recipient (DGR) status. 

For more information about setting up a workplace giving program, see the Australian Taxation Office’s information on setting up a workplace giving program. 

Bequest in your will

Another way of donating is to leave a bequest in your will. Contact the charity directly to discuss your plans. 

Get involved

Donating to charity doesn’t necessarily mean a cash donation. You can contribute to your favourite charity by making a donation of goods, your time or even your skills or expertise.

Check it’s a legitimate charity

Questions to ask

If the name of the charity is unfamiliar, you should ask for more information about the charity, for example:

• What cause do you support?

• Where is the charity based?

• What are donations used for?

• Are you affiliated with any other charities or organisations?

• Are donations tax deductible?

It pays to be careful, even if you get a satisfactory response to these questions.

Even if you’ve heard of the charity, you should check that the person who contacts you is authorised to represent the charity.

If you’ve been approached face-to-face, ask to see some identification and a copy of the charity’s pledge form. These should contain:

• the full name of the organisation

• the corporate registration number such as an Australian Business Number

• the business address

• the organisation’s logo

You should also call the charity directly to verify their contact details. Be sure to cross check their phone number in the telephone directory.

Charities must also be registered with the Australian Charities and Not-for-profits Commission (ACNC). You can check the ACNC website, to see if the charity is registered. Alternatively, the charity may display a Tick of Charity Registration (from the ACNC) to show they are a registered charity. 

Be wary of giving credit card details

If you’ve been contacted by phone do not give out your credit card or banking details. There will be other ways of donating if it’s a reputable charity. 

Ask about these options and make sure you check the validity of any website or social media page you’re directed to. 

To find out about the latest charity scams see the ACCC’s SCAM watch charity scams webpage.

Check if it’s tax deductible

A donation is only tax deductible if it is given to a charity that has been endorsed by the Australian Taxation Office (ATO) as a deductible gift recipient (DGR) organisation. 

To receive a deduction the donation must be two dollars or more and must be claimed in your tax return for the income year in which the donation was made. In some circumstances, you can elect to spread the tax deduction over five income years. For more information visit the ATO’s gifts and donations webpage. 

You can check if an organisation is a DGR by visiting the Australian Business Register or phoning the ATO on 13 28 61.

Complain if you have a problem

You can complain about a charity to the relevant state or territory regulator. To find the regulator in your state visit the ATO: State and territory government requirements – fundraising. You can also complain to the Australian Charities and Not-for-Profits Commission if the charity is registered, see the ACNC: Raise a concern about a charity webpage.

Australian charities working in the area of overseas aid, who get funding from AusAID, are required to be members of the Australian Council for International Development (ACFID), and must adhere to the ACFID Code of Conduct. For more information about the code, including its signatories and how to register a complaint, see the ACFID: Code of Conduct webpage. 

Donating is a great thing to do but you should always check the legitimacy of a charity before you donate.

Source: ASIC’s Moneysmart

Reproduced with the permission of ASIC’s MoneySmart Team. This article was originally published at https://www.moneysmart.gov.au/managing-your-money/donating

Important note: This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.  Past performance is not a reliable guide to future returns.

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Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Manufactured housing is a very resilient asset class – as showcased by the largest US operator Equity LifeStyle Properties growing its net operating income every single quarter going back to the late 1990s, including during the global financial crisis¹, and today the investment proposition is even more attractive.

Shipments of new manufactured houses have grown by 60 per cent over the past five years, and prices rose sharply through the first three quarters of 2018 whilst prices for site-built homes remained stagnant².

Affordability is a key factor in this resurgence. Ten years ago, 75 per cent of American houses sold for less than US$300,000. Today less than half of sales fall under that benchmark³. In contrast, the average price for a new manufactured home is less than US$80,000⁴. This is especially attractive to so-called ‘snowbirds’ looking to migrate from Canada and the northern states and relocate to warmer climates, a phenomenon that is accelerating as the population ages.

And as baby boomers continue to retire over the next twenty years, the manufactured housing market that focuses on age-restricted parks is set for unprecedented strong demand.

Recent developments in the financing of manufactured homes have the potential to drive this growth even further. Traditionally, borrowing for manufactured housing has been considerably more difficult and expensive than for site-built homes, with buyers forced to take chattel loans rather than mortgages to fund their purchases. The widely-held presumption was that these assets would depreciate, rather than appreciate in value.

Source: United States Census Bureau, July 2018; United States Census Bureau, December 2017. Charts: Sun Communities, November 2018.

However, continually improving offerings from manufacturers and a change in policy direction by the US Government have turned that model on its head. In December 2016, the Federal Housing Financing Agency (FHFA) issued Fannie Mae and Freddie Mac with a “duty to serve under-served markets”, including manufactured housing, and the two government-sponsored mortgage buyers have begun to expand their reach into the manufactured housing market, driving down interest rates for borrowers. At the same time, new analysis of repeat-transaction prices by the FHFA indicates that manufactured housing may actually appreciate in a similar manner to site-built homes⁵.

While demand for shipments remains high, so too will demand for land and facilities to accommodate them. REITs with assets concentrated in residential parks, like the AMP Capital Global Property Securities Fund, which is an active ETF trading on the Australian Stock Exchange, gain from exposure to market upside with low overheads, such as maintenance and customer turnover, compared to traditional property assets. In addition, the reluctance of local authorities to approve new residential park developments (only ten were approved nation-wide in the US in 2017) means that constrained supply is likely to preserve or increase the value of these investments for some time to come.

With options like vaulted ceilings, walk-in wardrobes and built-in fireplaces widespread across the industry, manufactured homes have well and truly shed any lingering association with the trailer park and have become a solid option for first home buyers and retirees alike. There’s a reason Warren Buffet has a large stake in the sector and why the legendary real estate investor Sam Zell continues to promote the view that this truly is an institutional real estate sector – put it down as one to watch over the next few years.

Source : AMP CAPITAL May 2109 

1 Equity LifeStyle Properties, Investor relations presentation, February 2019.
2 United States Census Bureau, Manufactured Housing Survey Data, February 2019.
3 United States Census Bureau, New Residential Sales. 
4 United States Census Bureau, Average sales price of new manufactures homes, June 2018.
5 Federal Housing Finance Agency, House Price Index, August 2018.

Listed infrastructure is an asset class that just a decade ago was poorly understood by many investors. It is now a diverse $3 trillion investment opportunity1. More and more investors are allocating to the asset class due to the differentiated return/risk characteristics we believe it offers. As infrastructure assets often have their profits guaranteed by long-term contracts or regulation, returns tend to be relatively predictable over the long term. For investors, this provides extremely good visibility for cash flows and ultimately, dividends.

Long-term infrastructure investors should appreciate that the majority of short-term returns are driven by multiple expansion and contraction, but over the long term this has little impact. As seen in the chart below, profit growth for infrastructure companies has been consistently positive year on year. Years with negative total return have primarily been driven by multiple compression, despite positive profit growth.

Past performance is not a reliable indicator of future performance. Source: AMP Capital, Bloomberg as at 31 December 2018. Data frequency: quarterly. Data based on the AMP Capital’s Global Listed Infrastructure universe.

However, over the long term, the multiples effect has been neutral. We believe cash flow growth is ultimately what drives returns. This is why our investment process has a stringent focus on cash flows, compared to the more generalist investor, and short-term volatility creates opportunities for us to generate alpha for our clients.

Past performance is not a reliable indicator of future performance. Source: AMP Capital, Bloomberg as at 31 December 2018. Data frequency: quarterly. Data based on the AMP Capital’s Global Listed Infrastructure universe.

By investing in listed infrastructure, investors can access a broad set of liquid investment opportunities across geographies and sectors. However, not all infrastructure is the same. At AMP Capital, we have a strict focus on long-term cashflow stability and filter the broader infrastructure universe for the following characteristics.

As a result, we believe that most of the infrastructure opportunities lies outside of Australia, which only holds approximately two percent of the global share. North America accounts for more than half of all infrastructure assets, with a third in Europe and the remaining located in Asia Pacific and Latin America. We also categorise these assets in four main sectors: energy infrastructure, utilities, transportation and communications.

Regulatory frameworks and contract structures vary greatly from sector to sector and from region to region, as they are based on and exposed to macro variables in different ways. This highlights the importance of diversification to help mitigate risks in concentrated exposure to regional economic downturns and regulations.

The quality of core infrastructure assets on the listed market is high and there are sectors where listed companies lead private companies in terms of operational excellence. In many instances, assets are co-owned by listed infrastructure companies and direct investors. Listed infrastructure is generally considered alongside unlisted funds or buying directly into assets. Each has it benefits and drawbacks, as the table below shows.

Notably the liquidity of listed infrastructure makes it accessible to a wider range of investors than the direct approach. We believe that returns between listed and unlisted assets are very similar over a full market cycle as ultimately the underlying asset, rather than the capital structure, determines returns.

Additionally, as demand for infrastructure assets have grown exponentially, we have also seen a corresponding spike in undeployed capital within unlisted infrastructure funds. While the capital flowing into the sector enables many new projects, competition for high quality assets will be fiercer and valuations will rise. Therefore, it is only natural that listed companies with access to high quality infrastructure assets and trading at attractive valuations to become potential targets for unlisted infrastructure funds under pressure to put capital to work.

These dynamics, alongside the growing numbers of investors awakening to the attractiveness of the listed infrastructure, mean that positive supply/demand drivers should add support to the strong fundamentals of high-quality infrastructure businesses.

Please contct us on |PHONE| if you would like to discuss.

¹ Total market capitalisation of the AMP Capital Global Listed Infrastructure Universe of over 250 stocks.

Author : Giuseppe Corona, Head of Global Listed Infrastructure, London, United Kingdom

Source : AMP Capital

Important notes
While every care has been taken in the preparation of this document, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) (AMP Capital) makes no representation or warranty as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This document has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this document, and seek professional advice, having regard to the investor’s objectives, financial situation and needs.