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The slowdown in June quarter GDP growth to just 0.5% quarter on quarter, or just 2% on a US style annualised basis, against the backdrop of weak commodity prices, the end of the mining investment boom and rising unemployment may add to consternation regarding the Australian economic outlook. And yet the local share market has been performing well. Is the outlook as bad as some fear or have shares got it right? Yet again the share market seems to have taken comfort from recent earnings results so I’ll start there.
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Australian house prices are among the world's most expensive when measured against incomes and rents, according to the Bank for International Settlements, but it also finds real price growth in the country has been flat once adjusted for long-term trends.
According to the BIS's latest quarterly review of global housing, Australia was the second most expensive market on a seasonally and inflation-adjusted index of advanced economies, behind Norway and ahead of Great Britain and Sweden. Australia scored 200 points, where the base, representing the average of the full sample of countries, is 100.
On a price-to-rent ratio, which assesses the theoretical ability of rental yield to cover mortgage costs, Australia is also among the world's highest-cost housing markets. The Basel-based BIS, which acts as a central bank to the world's central banks, puts Australia's ratio at around 150, which is 50 points above the historical average of the sample group, behind only Sweden, Canada and Norway.
The same goes for the price-to-income ratio, which reflects affordability. Australia comes in at 140 points, just behind highest-rated Belgium but on the same line as Canada and New Zealand.
These metrics, according to BIS, could point to a reversal or moderation of recent growth, or a further sliding in prices. Highly-placed markets on the price-to-income index also looked vulnerable, the BIS said.
"While for most countries the current ratio implies that price movements are not diverging from rental values in ways that imply unsustainability, for a number of other countries current property prices are much higher than those implied by the historical relationship to rents," the BIS said.
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Under a bill passed in the Senate with Government amendments, the SG rate will remain at 9.5 per cent for seven years, rising to 10 per cent from July 2021 and then progressively rising to 12 per cent by July 2025.
One way you can try to keep your retirement savings on track despite the delay in increasing the SG rate is to make salary-sacrificed super contributions. This is provided you can afford it and have the savings discipline to instigate a salary-sacrificing strategy.
Of course, making a decision to make salary-sacrificed contributions can be difficult, depending on personal circumstances.
And those of us facing the costs of mortgage repayments, education of their children and general cost-of-living pressures have to decide where saving for retirement fits in with their long list of financial priorities. It can be a tough call.
There are a range of benefits from salary-sacrificing into super, depending upon your circumstances. These include contributions being taxed at 15 per cent rather than marginal tax rates payable on salaries (an advantage for most taxpayers) and earnings within the super fund being concessionally taxed.
It would be timely to gather as much information about salary-sacrificed contributions and to possibly seek guidance from a financial planner.
In short, the pause in the planned increases in the SG rate places more of the initiative on individuals to take decisive action to better prepare for retirement.
To find out more about salary-sacrificed contributions speak to Southern Advisory today.
Take some initial steps to reorganise your finances without your partner.
If your partner was the one who took care of the money, find out how things were organised and see if you want to make any changes. Focus on setting yourself up for the future.
Adjust to a change in income
Re-establish where your money comes from and where it goes - find and organise all your key financial documents such as utility bills, credit card bills, home loan details, insurance policies and superannuation accounts.
Do a budget and keep it up to date - write down all your income and expenses then look at what's essential and what you could cut back. Saving a few extra dollars each week can add up to a big difference over time.
Get financial information and advice
You might need advice to help you make decisions about housing, educating your children or managing your debts.
Your changed circumstances may also affect payments you are receiving or could receive.
For longer-term help to improve your investments and to develop a money plan, consider getting financial advice.
Organise your will, insurance and superannuation
Update your will to reflect the changes in your life.
Think about insurance, including car, home and contents, and income and life protection insurance, especially if you have children.
Getting your superannuation sorted after your relationship ends is an important step in planning for your future.
Organising your finances can make a difference to your future, so speak to Southern Advisory about your options today.
Sean Thomas - Financial planner