Create the life you want
This year seems to by flying by once again. We already find ourselves a quarter of the way through a new calendar year, with the end of the financial year only three months away. It is with this in mind that we are writing to you to update you on what is going on in the world and with Chrysalis Lifestyle Planning.
Federal Budget – Tonight
The Australian Federal Budget will be handed down tonight. Budget night usually takes place on the second Tuesday in May but has been brought forward this year due to the looming Federal election. Being an election year, we are expecting it to be full of promises, cash handouts have already been touted to help with the rising cost of living, with the Morrison government taking a final stab at improving their current position in the polls.
We will send out a Budget update in the coming days once the details of the budget have been digested, outlining what you need to know.
Investment Markets & Volatility
Inflation is the current the talk of the town and we have been speaking with clients over recent months around our thoughts on where we think inflation is heading.
Inflation is the number one metric that most global Central Banks aim to keep in-check, with the use of interest rates as the main tool with which to contain it. In Australia a range of 2 to 3% per annum inflation is seen as healthy to support sustainable economic growth, and this will be a key theme throughout the remainder of this year.
Like recently in the US, it is expected that the Reserve Bank of Australia (RBA) will also increase interest rates by small increments (likely 0.25% each time) throughout the remainder of this year with the aim to have the inflation rate in the target 2-3% band. Currently many commentors are predicting three to four 0.25% increases by the end of 2022. However, there is currently a lot of variables at play globally that can impact on these predications such as recovery from the Covid pandemic and geopolitical tensions such as Russia, China and North Korea.
Increasing rates will impact property prices in Australia (and elsewhere), particularly in areas that have experienced exceptionally large price rises over the past few years. We are beginning to see signs of this, with the Sydney and Melbourne auction clearance rates down materially of late and prices are starting to follow suit.
Don’t mention the war
We will continue to keep you updated with our thoughts and analysis regarding the war in the Ukraine. These terrible events continue to unfold, and we there does not appear to be a clear end in sight currently.
The exact end goal of the Russian invasion remains unknown. Vladimir Putin has described his aims as being the “demilitarisation” and “denazification” of Ukraine, all of which wreaks of hypocrisy given the number of innocent lives lost so far due to this unprovoked war.
We have written separate communications on this event and will continue to keep you updated when necessary. Needless to say, our thoughts and prayers are with the people of the Ukraine and we hope to eventually see peace talks prevail.
Is there such thing as a silver lining?
It’s hard to accept that there may be a silver lining to the current conflict, especially considering the current suffering of the Ukrainian people. That said, the Australian economy, and in fact the Australian stock market, has performed well on a relative basis under the current market uncertainty. This has been driven by opportunities that have opened for Australian commodity producers who are replacing commodities previously supplied by Russia and the Ukraine, at a time of record high prices.
The below chart shows the performance of the Australian Stock Market (blue line) versus the US markets (purple line), and you can see that the Australian markets have outperformed by almost 4.50% over the past 3 months. However, longer terms numbers are not quite as flattering for Australian markets.
The Chrysalis Investment Committee will continue to monitor these events daily and look to navigate through these uncertain times. We are currently considering some potential portfolio positioning changes in the near future and will be in touch in the coming weeks regarding the timing of these changes as they proceed.
Changes to superannuation
Yes, yet again we are gearing up for some further changes to Super! However, the changes that have recently been passed by parliament are positive and will largely be beneficial for most Australian superannuation holders. We have summarised some of the more important changes below:
- Abolishing the work test for retirees. From 1 July 2022 you will be able to top up your super between the ages of 67 to 74, without having to pass a work test.
- Expanding the Downsizer scheme. The eligibility age for the downsizer scheme will be lowered from age 65 to age 60. This will allow anyone age 60 or more, who has sold a primary place of residence, to add a further $300,000 each into super (up to $600,000 for a couple).
- Expansion of the First Home Super Saver Scheme. This scheme will now increase from $30,000 to $50,000 for those managing this strategy via their super.
If you would like to discuss any of the above changes, please speak with your Chrysalis adviser as we’d be more than happy to talk you though these changes and their potential impact on your circumstances.
Chrysalis Lifestyle Planning Update
We are pleased to report that Chrysalis continues to perform well as a business during these uncertain times, with us recently experiencing one of the busiest starts to the year that we have ever experienced. We have had a couple of staff changes, with Kate and Roz accepting new opportunities recently. We wish them all the very best in their new endeavours and look forward to announcing our new staff members shortly as we continue to build the Chrysalis team.
COVID continues to impact on all of our daily lives and we are continuing to focus on ensuring we keep staff and clients safe when attending our office. We have been diligent that any staff with flu like symptoms work’s from home and takes regular ‘RAT’ tests, only returning to the office when they are symptom free and have a negative test.
We also ask that you continue to keep us informed if you have a meeting booked with us of any flu-like symptoms or have been considered a ‘close contact’ to a COIVD positive case.
In conclusion
As we continue to work through 2022, and with all that the last few years have thrown at us, the Chrysalis team continue to be here to support you and your families as always. With the recent superannuation changes taking effect from 1st July this year, we will be looking for opportunities for our clients to be able to tap into these new rules to further assist with their retirement plans.
As has been the case in years past, we expect another busy end to the financial year. As such, we strongly recommend that anyone looking to make any additional investments, superannuation contributions, withdrawals or any other changes to your current arrangements, please get in touch with us in the next month or so, so there is plenty of time to assist you with these matters. Changes such as these should be made before the end of May 2022, not the last few weeks of June, which can lead to missing the necessary deadlines.
Superannuation Fun Fact – Did you know that under certain circumstances you can go over the current super contributions cap of $27,500 this financial year?
If you have less than $500,000 in super and have unused concessional (tax-deductible) superannuation contribution amounts from prior years, then you can make tax deductible contributions into your super that can exceed the current $27,500 contribution cap. If you think this is a strategy you would like to explore, please get in contact with your adviser. More broadly if you know someone you think would also help with their wealth and retirement planning, please feel free to provide them our details – we’re happy to help.
