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At its meeting today, the Board decided to leave the cash rate unchanged at 2.5 per cent.
Since the Board’s previous meeting, information on the global economy has been consistent with growth having been a bit below trend in 2013, but with reasonable prospects of a pick-up this year. The United States economy continues its expansion and the euro area has begun a recovery from recession, albeit a fragile one. Japan has recorded a significant pick-up in growth, while China’s growth remains in line with policymakers’ objectives. Commodity prices have declined from their peaks but in historical terms remain high.

The Federal Reserve has begun the process of curtailing stimulus measures but financial conditions overall remain very accommodative. Long-term interest rates and most risk spreads remain low. Equity and credit markets remain able to provide adequate funding, but for some emerging market countries conditions are considerably more challenging than they were a year ago.

In Australia, information becoming available over the summer suggests slightly firmer consumer demand and foreshadows a solid expansion in housing construction. Some indicators of business conditions and confidence have shown improvement. At the same time, with resources sector investment spending set to decline significantly, considerable structural change occurring and lingering uncertainty in some areas of the business community, near-term prospects for business investment remain subdued. The demand for labour has remained weak and, as a result, the rate of unemployment has continued to edge higher. Growth in wages has declined noticeably.
Inflation in the December quarter was higher than expected. This may be explained in part by faster than anticipated pass-through of the lower exchange rate, though domestic prices also continued to rise at a solid pace, despite slower growth in labour costs. If domestic costs remain contained, some moderation in the growth of prices for non-traded goods could be expected over time.

Monetary policy remains accommodative. Interest rates are very low and savers continue to look for higher returns in response to low rates on safe instruments. Credit growth remains low overall but is picking up gradually for households. Dwelling prices have increased further over the past several months. The exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.

Looking ahead, the Bank expects growth to remain below trend for a time yet and unemployment to rise further before it peaks. Beyond the short term, growth is expected to strengthen, helped by continued low interest rates and the lower exchange rate. Inflation is expected to be somewhat higher than forecast three months ago, but still consistent with the 2–3 per cent target over the next two years.
In the Board’s judgement, monetary policy is appropriately configured to foster sustainable growth in demand and inflation outcomes consistent with the target. On present indications, the most prudent course is likely to be a period of stability in interest rates.

http://www.rba.gov.au/media-releases/2014/mr-14-01.html (04.02.2014)

Donegan’s Wealth Advisers are pleased to enclose the January 2014 edition of Market Update.

Global economies last month continued to show signs of improvement, with rising employment and overall higher demand seen throughout the major economies.

In the US, the Federal Reserve started its dial down of QE3, with an initial reduction of US$10b, down to US$75b. Janet Yellen, the new Federal Reserve Chairperson elect, was also voted in by Congress.

On the home front, residential property finished 2013 on a strong note, with sales volumes at record levels in Sydney and Melbourne. The Mid Year Economic and Fiscal Outlook was also released last month, and concluded that the budget would remain in deficit throughout the forecast period until 2016/2017.

As markets continue to remain uncertain in the short term, please remember to remain focused on your long-term goals.

If you’d like to discuss anything in this report please contact Donegan’s Wealth Advisers.

Market update 15th January 2014

Donegan’s would like to wish all its clients an enjoyable Christmas holiday period!

Note, the office will reopen Monday 6th January, 2014.

With hectic lives, it can be difficult to think beyond the next few days or weeks, and planning for life’s financial milestones often gets pushed to the bottom of the priority list. But these milestones: getting married, having a baby, paying off the home loan or switching jobs, have their costs.
Whether you’ve a milestone on the horizon, or you want to be proactive about planning for your financial future, getting the right advice can help you reach your goals sooner.

Here we look at five milestone moments when getting serious about your finances can seriously help you.

Getting married
Cakes, confetti, a douse of courage, and some hefty costs! It seems whenever the terms ‘wedding’ or ’bride’ are involved, a zero is added to any price tag! From hen do’s to honeymoons it pays to do a full bridal budget.

To help with the costs of planning for your wedding and your financial future as a couple, most financial planners will offer an initial free consultation.

This gives you the chance to get to know the adviser and make sure you’re comfortable with them before you have to make any decisions involving fees. Contact Alison Foenander of Donegan’s Wealth Advisers to find out exactly what they do and how they can help you specifically.

According to Alison Foenander of Donegan’s Wealth Advisers there are plenty of strategies couples can take advantage of. “Getting married doesn’t mean everything has to go into one joint pot; there are lots of strategies an adviser can show you to make the most of your money and help you reduce the tax you pay,” Alison says.

Having children
Thinking about starting or adding to your family? Having a baby is an extraordinary gift, but from the minute you see those double lines on the home pregnancy test, the questions start.
Are we ready for this? Will we be able to do it? Are we going to be good parents? Not forgetting one of the biggest factors in today’s increasingly expensive world: can we afford it?
A recent study conducted by the National Centre for Social and Economic Modeling revealed: “…the total cost in today’s dollars is $448,000 for the average family to raise two children from birth to age 20. For the average couple with two children today, those children cost around $310 a week.”
Taking time plan for your future means, even if your income levels change, you’ll still be able to maintain your family’s lifestyle without worrying about money.

Things to think about include:
1. How do you protect and keep your family financially secure? Do you have enough life, disability and income protection insurance? A recent survey by salary.com put the ‘market value’ of a stay-at-home mum at $124,000 per year.
2. How would your family income change if one person takes time off to stay at home with the kids?
3. Have you done a baby budget, including everything from cots to a new family car?
4. Are your wills up to date?
Donegan’s Wealth Advisers can help with these questions and can also help you set up your insurance inside your super so you don’t have to worry about your cash flow being affected.

10 years into the mortgage
Most homeowners have the same thought at some stage or another: ‘how do I pay off my mortgage faster?’ Believe it or not there are a lot of things you can do to get the end of those payments in sight sooner.
Alison Foenander says that, “It’s important for a mortgage to be set up correctly from the outset.” Other simple tips, like increasing how often you pay your loan can make a difference. You don’t pay any more per year, but by paying more frequently such as every fortnight, you’ll reduce your interest amounts and this can mean reducing your home loan by hundreds of dollars a year.

Changing jobs
Changing jobs is stressful enough without worrying how it might affect your long-term financial goals.

But it’s a great time to get some one-on-one advice to find the right super for you so you don’t end up with multiple super accounts, each with their own separate fees.

“What would you do if every pay day someone, who was virtually unknown to you, took over 9% of your pay and said ‘don’t worry I’ll look after it for you’? Would you let them walk away and assume the money would come back to you at some time, with interest?” says Alison Foenander “There’s an assumption it will be looked after and a sense of comfort there’ll be a nice nest-egg waiting for our retirement” continues Alison Foenander “but many funds saw steep losses during the GFC and having the right advice as to which fund you should be with and how to invest your super to suit your needs can help you reach and even exceed your financial goals.”

Receiving a lump sum payment
You might have received a bonus, windfall or bequest or maybe you’re even going through a divorce. In any even you need that money to work to secure your long-term future. Quality financial advice can help you make the most of your situation.

Donegan’s Wealth Advisers will consider your investment timeframe, attitude to risk and the investment choices available. They’ll also look at how you can invest your lump sum tax effectively and develop a plan to get your finances working.

Is it time for you to get serious with your finances? Contact Alison Foenander of Donegan’s Wealth Advisers for more information on 03 9670 5232 or via email at alisonf@donegans.com.au to book your free initial consultation today.

Apogee Financial Planning Limited ABN 28 056 426 932, an Australian Financial Services Licensee, Registered office at 105-153 Miller Street, North Sydney, NSW 2060 and a member of the National Australia Group of Companies. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

We are proud to be supporting Dianna Snape and her 10 day on-line auction “Lunch Money”.

Lunch Money is supporting African students by raising funds in order to provide the students with lunch each day.

To bid or to find out more information, visit: http://lunchmoney.com.au/

On Friday 5th April 2013 the Federal Government announced a number of proposed superannuation reforms. Following is a brief summary of the proposals:

1. Taxation of pension earnings in excess of $100,000 per member – Commencing 1st July 2014 all earnings on superannuation assets supporting income streams for superannuation pensions will be taxed once those earnings exceed $100,000. Earnings up to a $100,000 threshold per member will be tax free; however earnings above $100,000 will be taxed at 15% (current rate of income tax applied to earnings generated by a superannuation fund in accumulation phase). The $100,000 threshold will be indexed annually by CPI in increments of $10,000.

Administration of this proposed measure is likely to be difficult, particularly where an individual is a member of more than one superannuation fund.

2. Realised Capital Gains – realised capital gains will be included in the determination of earnings on superannuation assets supporting superannuation pension streams and it is proposed that transitional rules will apply for assets purchased prior to 1st July 2014. Proposed transitional rules are:

a. Realised capital gains on assets acquired prior to 5th April 2013 – only the capital gain that has accrued after 1st July 2024 will be taxable; and
b. Realised capital gains on assets acquired between 5th April 2013 and 30 June 2014 – superannuation funds have a choice of applying the tax to the entire capital gain or only the portion of the capital gain that accrues post 1st July 2014;

At this stage it is unclear as to whether the current discounted tax rate of 10% for assets held for greater than 12 months will continue to apply.

3. Increased concessional contribution caps – a $35,000 per annum cap for older taxpayers is proposed to apply to:

a. Taxpayers aged 60 and over from 1st July 2013; and
b. Taxpayers aged 50 and over from 1st July 2014.

The Government has also stated that they expect that the general concessional contributions cap of $25,000 per annum will reach $35,000 per annum at 1st July 2018. Further the Government has also advised that the increased cap will not be restricted to taxpayers with superannuation balances of less than $500,000, as previously announced.

4. Excess contributions tax – the proposals will allow an individual who makes an excess concessional contribution from 1st July 2013 onwards to withdraw that excess from their superannuation fund. Excess contributions will be taxed at the individual’s marginal tax rate and will incur an interest charge to recognize that the tax is collected later than normal income tax.

5. Deeming rules to apply for the purpose of the age pension income test to account based superannuation income streams commenced after 1st January 2015. Account based income streams held by age pensioners prior to 1st January 2015 will be grandfathered indefinitely and will continue to be assessed for age pension purposes for the life of the income stream. Please note that this proposal will not be applicable to non-purchased pensions such as a public service defined benefit pension scheme.

Further clarity is required regarding:

a. The application of the grandfathering rules where a pension in commenced before 1st July 2015 by an individual who is not eligible for the age pension until after this date; and
b. The need for pensions to be reversionary to ensure that a surviving spouse retains the grandfathered status of the income stream.

6. Deferred lifetime annuities will be concessionally taxed, receiving the same concessional taxation treatment superannuation assets supporting an income stream will receive from 1st July 2014.

Should you require advice regarding the above please contact Alison Foenander of Donegan’s Wealth Advisers on 03 9670 5232 or at alisonf@donegans.com.au.

Compiled and written by Alison Foenander