After being on “life support” for the past couple of months, the Australian economy is now beginning to open up. As we all venture out more boldly in the weeks ahead, we’ll have our fingers crossed that any uptick in COVID-19 cases will be small, contained and well managed. Financial markets have welcomed the news posting a whopping 50% recovery since the March lows.
According to Statista, there are many countries which are struggling to “flatten the curve”, something which will no doubt result in a substantial loss of life. Although Australia is in a fortunate position, there is no room for complacency.
Interest rates: Australian Bonds have started to also recover, however forward projections from the Reserve Bank indicate that low rates will remain for at-least three years. Naturally, this is great if you have a home loan, however painful if you’re trying to live on term deposit interest. Property: As expected, since the beginning of March, property listings have slowed to a crawl. The combination of strict social distancing measurers and cancellation of auctions has resulted in a sharp decline of available stock. With many still hesitant to make big financial decisions, it’s not surprising to see valuations soften a little. According to CoreLogic, capital city house prices declined by 0.5% in May – something which could have been substantially worse if the government didn’t provide various support mechanisms. Surprisingly, prices fell in all cities except for Adelaide, Hobart and Canberra. Centrelink and government support: For those who receive an eligible government entitlement, you should receive another government stimulus payment of $750 sometime in July 2020. Unlike last time, shops are now beginning to open - so spending the payment will be much easier. The much praised JobKeeper stimulus measures are due to cease from September, so it will be interesting to see if this is extended or tapered off in the coming months – something to watch out for. Tax tips: June can often be a frantic month for many, however waiting until the end of June to “get the house in order” can often cause severe stress and runs the risk of missing deadlines. If you have been fortunate enough to realise a substantial gain or simply want to reduce your tax, some strategies which could help include: a. Explore the option of making deductible super contributions b. Look to prepay deductible insurance premiums or deductible loan interest in advance c. If you’ve been working from home, look to claim home office expenses d. Consider selling investments which may have fallen in value to offset gains Please be mindful if attempting the above on your own. It is always advisable to seek professional advice from Synergy Private Wealth or from a suitably qualified accountant in regards to your specific situation. Summary: Short term economic data is going to look bleak and dreadful, however not as bad as originally expected. A second wave of COVID-19 cases represents a large risk which should not be ignored. This is also compounded by rising tensions between the US and China which have the potential to shake markets further. Markets will continue to remain volatile and continually “climb a wall of worry”. If you have concerns about your specific situation please reach out to the Synergy Private Wealth team for a confidential discussion. Synergy Private Wealth Level 3, 12 Pirie Street ADELAIDE SA 5000 E: info@synergypw.com
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