The 2020-21 Australian Budget – spend, spend, spend as the focus remains on recovery and jobs, jobs, jobs

Australia’s “eye popping” budget deficit and public debt blow out – can it be paid off? Does it matter?

In its September board meeting, we saw another move out of the RBA to support the Australian economy through COVID-19, and there could be more to come.

Victoria’s tightening lockdown could knock at least $12bn off the Victorian and national economy and delay the return to positive Australian GDP growth to the December quarter.

The thought of various government support measures expiring in the months ahead, causing some sort of fiscal cliff over which economies and share markets will plunge, has caused much consternation. But as with the original fiscal cliff of December 31, 2012 in the US, it’s likely to be tapered into a fiscal slope.

The past financial year was poor for investors as coronavirus knocked economies into what is likely to be their biggest hit since the 1930s. Shares were hit hard, but the blow was softened by a strong rebound in the June quarter. This note reviews the last financial year and takes a look at the outlook.

A serious second wave of coronavirus cases in major developed countries is the biggest risk facing equity markets, and one investors will need to watch closely.

The strong rally in shares since their March lows reflects a combination of economic reopening, signs of recovery, policy stimulus and once pessimistic investors closing underweight or short positions.

Australian house prices starting to fall – collapse likely averted but expect more weakness ahead

There has been much debate about the short-term economic and investment impact of coronavirus – on economic activity, unemployment, interest rates, house prices, shares, etc.

Back in January when the bushfires were raging, I feared Australia’s luck had ran out. But right now, I thank god I live in The Lucky Country!

THE INSIDE WORKINGS OF AN INVESTING RULEBOOK.

This is an update of a note I wrote last November, but after the recent plunge in shares and the associated 10% or so loss in balanced growth superannuation funds through the March quarter, it’s particularly relevant now.

After a strong rally, in the short-term shares are vulnerable to bleak economic and earnings news.

Central bank support to ensure the flow of money and credit through economies is an essential part of the global and Australian coronavirus economic rescue

MARKETS IN THE AGE OF (MIS) INFORMATION

While shares have rallied 15-20% from their March low and may have started a bottoming process

Significant government support is essential to enable parts of the economy to successfully hibernate

Global share markets have fallen into a bear market, but whether this turns out to be long or short depends on how long the hit to the economy from coronavirus lasts.

The Australian housing market is at risk from the coronavirus recession Australia has now entered. A relatively short recession that sees unemployment rise to around 7.5% would likely only set prices back around 5% or so after which prices would bounce back.

Successful investing can be really difficult in times like the present with immense uncertainty around the impact of coronavirus on the outlook.

The rout in financial markets has continued, on the back of coronavirus, made worse by a flow on to oil markets.

How the next generation is investing?

The plunge in share markets over the last week has generated much coverage and consternation.

While reported new coronavirus cases in China have slowed, the pickup in cases outside China has led to a renewed sharp fall in share markets and bond yields.

Shares are vulnerable to a short-term correction - Key things to watch out for are recession and much higher inflation.

From bushfires to coronavirus - five ways to turn down the noise around investing

The China coronavirus outbreak has led to concerns of a global pandemic triggering an economic downturn. Our base case is that the outbreak will be contained allowing share markets and bond yields to rebound. However, uncertainty is high given that the coronavirus is more contagious than SARS albeit with lower mortality. Key to watch for is a peak in new cases and contained transmission in developed countries.

Shares are at risk of a short-term correction or consolidation after a strong run over the last year and with sentiment now very bullish. However, this year should still see good returns for investors as global growth edges up and interest rates remain low. > Five key global charts to watch are: global business conditions PMIs; global inflation; the US yield curve; the US dollar; and global trade growth. > So far so good, with PMIs improving a bit, inflation remaining low, the yield curve steepening, the $US showing signs of topping and the US/China trade truce auguring well for some pick up in world trade growth.

The Australian bushfire season that began in September has been horrific with more than 7 million hectares of bush destroyed, more than 25 deaths, significant loss of livestock, estimates of more than a billion wildlife animals killed and more than 1800 homes destroyed. More than 200 fires are still burning. Following the intensification of the bushfires over the Christmas/New Year period attention has now turned to the impact on the economy. This note looks at the key impacts.

Even if you secured a competitive package when you first took out your home loan, it’s worth reviewing each year1 to ensure the interest rates, fees and features continue to meet your needs. By refinancing you may be able to pay off your home loan sooner.

In this month’s issue we discuss how: James Maydew believes that having culture and strategy on the same blueprint is an absolute imperative climate change is impacting the real estate sector, and how leaders and businesses are standing up to the task of tackling it Julie-Anne Mizzi uses her innate passion for investing in infrastructure for those who need it, and the familiar airport retail experience is set for a makeover.

2019 saw growth slow, recession fears increase and the US trade wars ramp up, but solid investment returns as monetary policy eased, bond yields fell and demand for unlisted assets remained strong. 2020 is likely to see global growth pick up with monetary policy remaining easy. Expect the RBA to cut the cash rate to 0.25% and to undertake quantitative easing. Against this backdrop, share markets are likely to see reasonable but more constrained & volatile returns, and bond yields are likely to back up resulting in good but more modest returns from a diversified mix of assets. The main things to keep an eye on are: the trade wars; the US election; global growth; Chinese growth; and fiscal versus monetary stimulus in Australia.

With the kick off of the new financial year, at its board meeting today the Reserve Bank of Australia decided to leave the official cash rate unchanged. The RBA continued its wait and see approach taking into account the latest edition of mixed economic data - including the fact that unemployment has remained steady at 5.7%, while underemployment remains high and real wage growth is low. The decision may also be due to an expectation that future growth forecasts will remain modest, inflation is forecast at the lower end of the RBA's target range, and signs that housing markets in Sydney and Melbourne may be slowing.

Gut instinct is no match for expert advice The property market outlook for 2017 What financial records do I need to keep? Thinking about managing your own super?

The RBA has opted to leave the official cash rate on hold at 1.5%. As lenders continue with their out of cycle rate increases, at its board meeting today the Reserve Bank of Australia decided to leave the official cash rate unchanged. This follows new data released yesterday that indicates the strong Sydney and Melbourne property markets may be close to peaking following APRA's intervention into the levels of interest only and investment lending the banks are funding.

Paul Clitheroe’s Making Money

If you’re wondering what’s involved in self managed super and whether it’s a good option for you, here are some things to consider.