With Financial Year 19/20 behind us, we now have an opportunity to rethink and reset for the future.
Although economic data will continue to disappoint for months to come, the Australian economy is beginning to open which should have a positive effect for many. Various risks continue to remain – especially as we face the possibility of a second wave (something which is currently occurring in Melbourne and in various US cities).
We are at a critical junction, as the next few weeks will reveal if the rise in cases result in a surge of hospitalisations – something which can have a significant effect on market confidence. Importantly, treatment for COVID-19 seems to have moved away from ventilator usage to the use of anti-inflammatories with better outcomes. Development of a vaccine continues at a rapid pace, with Pfizer’s CEO alluding to the possibility of a vaccine being available later this year. Results on a 30,000-person trial are due in September – clearly something to watch out for.
Credit card data suggests consumption is beginning to rebound, with savings rates also surging with the assistance of various government support payments. The much praised JobKeeper payment is currently scheduled to end in September, however many are predicting the Government will extend the entitlement to targeted industries likely to suffer prolonged pain (travel, airline and the arts to name a few).
Returns on cash based investments remain historically low, with many economists predicting continued low rates for another three years. Inflation is a key metric to watch, should inflation begin to rise this will have a flow on effect for interest rates.
Property values should see less volatility due to the Home Builder program, a measure which will give builders and connected industries a “sugar hit” of work. Essentially, the Government will pay a $25,000 grant towards building a new home or to substantially renovate an existing home (subject to certain criteria). Although the grant is not perfect (as it has the ability to increase property prices), it will give confidence for many to build which will stimulate the economy.
July and August can be frantic as we sort through receipts and prepare to lodge our tax returns. If you’ve worked from home over the past few months due to COVID-19, ensure you inform your tax accountant as you may qualify for added deductions. Additionally, if you have an Income Protection policy which is paid from bank account, it may be best to wait for the insurer to first provide you with a tax statement as these premiums are generally deductible.
Although the media often portrays “doom and gloom”, there are still many opportunities for investors to build wealth over the long term. If you have any questions about your personal situation, or know someone worried about their finances, as our team are always happy to help.
Synergy Private Wealth