Market/Finance News Blog: Australia's long term plan

By the resi financial blog team, 14 October 2014

Market/Finance News Blog: Australia's long term plan

One of the most common criticisms of budgeting, whether on a personal, business or national scale, is that it is not geared for the long run. Australia has disproved this sentiment in the last week, with market activity and commentary strongly favouring a long-term view.

Property

The determination of the Reserve Bank of Australia (RBA) in last week's announcement to keep the overnight cash rate at its all-time low of 2.5 per cent for the 14th month in a row, shows it is planning for the future, rather than reacting to immediate circumstances.

The RBA has been talking about the effect low interest rates have, in that they increase speculative demand and therefore prices. However, the RBA has also acknowledged that speculative investment does boost new property development, which increases supply and reduces prices.

In line with the view of increasing supply, the cash rate has remained at 2.5 per cent, as financial market conditions remain accommodative. The construction industry is playing its part with its highest rate of growth in nine years, according to the Housing Industry Australia (HIA) and Australian Industry Group PCI index.

Approvals for new building have increased 3 per cent month on month to August according to the Australian Bureau of Statistics, and sales of newly built homes have increased 3.3 per cent according to the HIA.

Retirement

The Australian superannuation scheme has ranked second in the world according to the 2014 Melbourne Mercer Global Pension Index (MMGPI), with only Denmark to beat. This is the first time Australia has surpassed the Netherlands in five years.

According to the MMGPI media release on October 13, the main reasons the Australian super scheme has surpassed other global pension schemes is increased adequacy due to a couple factors.

One of the major factors was an increase in superannuation guarantee (SG) payments. The increase from 9 to 9.5 per cent over the last 16 months was the first rise in SG payments in 11 years. The planned extension to 12 per cent would have played a major part as well.

If providing for your financial future is important to you, talk to a resi lending specialist to take control of your long-term wellbeing now.

Categories: Financial Services, Property Investment