As of 11 MAY 2020
We may have finally turned the corner. (fingers crossed) This is the beginning of the end for the restrictions that have been held over our lives and the economy. Prime Minister Scott Morrison has unveiled the National Cabinet’s three-stage plan to reopen Australia, economically and recreationally, from the COVID-19 lockdown. Although all states and territories across the country will share the same path back to some semblance of “normality”, each jurisdiction will determine its own pace.
State and territory leaders, as well as the Prime Minister, announced in the National Cabinet meeting on Friday that certain coronavirus restrictions can be lifted around the country. It means we have dates for when outdoor activities can resume, indoor gatherings, and maybe even the opening dates of restaurants and cafes. So this is good news as I’m sure we are all missing the freedom that many of these activities brings and we probably took for granted before this crisis. It will be a slow release and we may have to wait until July until we can go back into pubs and restaurants.
Treasury estimates that maintaining the coronavirus shutdown is costing the economy $4 billion a week. So re-opening our economy can only be a positive as it will allow many out of work Australians to get back to the grind.
Treasury has also predicted unemployment will double to 10 per cent in the June quarter — its highest rate in 26 years — meaning an estimated 700,000 Australians will be without work – that is a big number to mobilise back into a potentially changed work environment.
They may weaken in the next quarter on the back of this information as we may still see poor results for business’s through to the June reporting quarter.
However we expect to see improvement in results for the 3rd and 4th Quarters.
Markets may still have some way to go before we can be confident of a full recovery (fingers crossed there is no second wave) but it also means that there is no need to rush back into the market and continuing to ‘look through the noise’ buying quality will be the key!
We have attached a second article titled “Three reasons why Australia may come through this period of global misery better than most countries” by Dr Shane Oliver Chief Economist with AMP which we hope paints a picture of hope for Australia emerging better than most.
As of 6 APRIL 2020
The team at Guide Financial remain on board working to help improve your confidence in your financial journey through this period of uncertainty. Our existing clients are our priority during this time, and we will be taking the time to provide our advice on the best course of action for your personal situation. We have a skeleton staff on in the office with the rest of staff continuing their roles from home for safety.
We are still continuing reviews via phone and skype for all clients and implore you to contact us for advice before making decisions on loans or superannuation that could impact your financial future. This is what we are here for and for most existing clients on a service package this advice forms part of your existing ongoing services.
The following comments will give you an idea of what we are working on and some of the financial assistance available at this time.
What are we working on behind the scenes?
So in terms of what we are doing as advisers, as you would expect, we have been busy (but in constructive ways).
Advice: We have been checking in with clients to ensure they have the cash set aside to get through what will be a challenging period. For our retirees, this means having at least two years of spending in cash and term deposits, and for accumulators that means at least three months of spending in cash and strong consideration to increasing regular wealth plan contributions whilst the sales are on.
Lending: We have been pushing back on lenders to ensure our clients are getting the best home loan rate possible and supporting some of our small business clients with what for many is very confronting. Where you can, please support small businesses in your community as many are doing it tough. Clients who are financially impacted by the coronavirus should also be aware that they can apply to their bank to defer home loan repayments for up to six months if needed. For the duration of the support period no repayments are required. However during this time, interest and charges will add to the loan balance. At the end of the support period, your required repayment amount will increase so you repay the total balance over the remaining loan term.
The Australian Taxation Office, to their credit, are being fairly reasonable given the current climate so if you do owe any money to the ATO now is an opportune time to call them to ask for a payment deferral or waiver of any interest.
Investment strategy: We continue to research and review each of the assets within the models that our clients are invested in, including some tactical shifts as a result of the volatility. At this time the Investment Committee has opted for changes that we know will provide us with a certain outcome. In the quarterly rebalance in a little over one week, we will make some changes to the ETF’s we use to track the Australian and global sharemarkets that will see the fees paid for the same strategy reduced by over 40%. We have reviewed our corporate credit exposure, and remain comfortable that the businesses are sound. With the recent flight to safety and fall in the value of the AUD, we are also giving consideration to having a larger portion of your international portfolio hedged.
In terms of our investment portfolios, through careful manager selection we have sought to reduce risk, and each quarter since we have rebalanced the asset allocation and investments (where available). This has meant that our portfolios have not fallen as sharply as the overall investment markets, which will mean your recovery is quicker. When the recovery does come.
Pension Minimum Drawdowns reduced: Self-funded retirees will be relieved the Government has moved quickly to temporarily reduce the minimum drawdown rates for superannuation pensions. This means retirees will be under less pressure to sell pension assets in a falling market to meet the minimum payments they are required to withdraw each financial year. If this is your situation give us a call if you would like to discuss reviewing the appropriate draw down amount for your specific situation.
Superannuation access: We think it is important to note, withdrawing money from superannuation to fund cash flow needs at the moment has implications in that you would be withdrawing funds after a major market correction – not the optimal time to withdraw funds – and you will also be potentially impacting on your longer-term retirement plans. This may be the only option for some and as such it could be helpful, however please speak to us prior to going down this path. Details include, the government has allowed access to up to $10,000 of your Superannuation now and another $10,000 after 1 July. These payments will be tax free to the individual. You have to prove working hours or business turnover has decreased by at least 20% in order to be eligible.
For the details of all incentives there is a plethora of information with the government site is staying very current on these incentives to these following links will provide the most up to date information including fact sheets on each available incentive.
Support for Individuals includes
- JobKeeper payment for households
- Income support for individuals
- Payments to support households
- Temporary early release of superannuation
- Temporarily reducing superannuation minimum drawdown rates
- Reducing social security deeming rates
For more information on these incentives read here. https://treasury.gov.au/coronavirus/households
Support for Businesses includes
- JobKeeper payment
- Business Cashflow boost – we found this handy calculator for employers wanting to calculate their entitlement. Click here to try it out. https://digit.business/payg-cashflow-boost-calculator-advanced?fbclid=IwAR2A1bJfhqxxOS_lCVn2ehig627umIKkTUjEQtMZv5FhXdhUrqFfSBf77-s
- Temporary relief for financially distressed businesses
- Increasing the instant asset write-off
- Backing business investment
- Supporting apprentices and trainees
For more information on these incentives read here. https://treasury.gov.au/coronavirus/businesses