Jen’s Note, May 2009

As I write the share market is the highest it has been since November 2008.  Does this mean that the economy is in great shape?  I think not, but what it does mean is that there is more confidence in the belief that the economy will recover.

Many people are buying shares through their super funds before the May Federal Budget and others are taking the opportunity to buy very sound companies at very good prices. Will the Budget affect the markets? Well they always do in some way, and this time the Treasurer has been fairly candid about “hitting the wealthy”.

Just why they think that is a good idea is beyond me. I saw the damage that did during the Whitlam era when the wealthy were penalised simply for being successful. When this type of small minded behaviour happens it does far more damage to those who can least afford it than to anyone else.

What happens is this; the wealthy stop spending. So what happens then? They have small private dinners at home, they decide not to buy the designer clothes, and they decide to only have a facial every couple of months instead of every month. They postpone the house renovation and drop the regular fresh flowers every week and just have them for special occasions.  The cleaners come once a fortnight instead of every week and the landscape gardener is replaced by Jim’s Mowing once a month.

In short, the people who need the work that the wealthy provide lose out.  It also follows that stores reduce their inventories so that spur of the moment sale is lost when someone has to wait for their size to come in, or the new couch is cancelled once someone has a chance to rethink if they really need the new couch. They hang on to the current car rather than buy a new one and they go to cheaper restaurants and not as often as they did before.
That’s where the job losses will build from, not just from the effect of the global crisis. We must have the Federal Government take action to provide confidence in the economy by stimulating investment in infrastructure, such as the much mooted Broadband national network. We need to upgrade our ports, the railways and hospitals. Education needs to be improved so that our children do not leave school with the vocabulary of texting rather than the ability to express themselves and their ideas in sound terms .They need the mathematical skills and analytical skills to make their way in a world that may be very high tech, but still needs creative thinkers to keep our nation abreast with the rest of the world.

There have been lots of suggestions that the Budget will affect superannuation. Well that would not be a surprise;  I have given up keeping track of the changes in relation to super. If I remember correctly it was about 2000 changes between 1984 and the mid 1990’s and we lived through all that so I guess we will cope with the next lot.

The next few months will still be difficult for everyone who depends on others buying their goods and services. Those who are employed should be thankful and take the opportunity to build themselves a sound base of financial security by saving as much as they can and only paying cash for goods and services purchased and not using credit for non essential or indeed essential expenses.

It’ s surprising how much you can do without if you only spend cash and do not use your credit card. The people who are going to learn bitter ,but life changing lessons are those young people who  have had good jobs and spent everything that they earned and then topped that up with credit card debt. These are the very people who are most at risk of losing jobs and who will find it harder to become reemployed.

Older workers are going to remain employed for longer and employers find them stable and reliable. The show pony employee will be at risk if there are to be job cuts. All workers should aim to save at least six months living expenses as a backstop to provide for them if they lose their job. A new job will be harder to find and it is very possible that the salary will be lower than the previous job.

This recession will last longer than the previous ones over the past twenty years. The reason is that fundamentals in the financial systems worldwide have to be worked through and we also face increasing claims from underdeveloped countries to participate in the overall wealth of the world. Modern communication means that no nation is unaware of the lifestyle of the developed countries; they see that for the most part all the potential has to a certain extent been squandered by indulgent living by the people, who like the grasshopper in the fable, sang and played all day and did nothing to set resources aside to provide for the days when things were not so easy.

This is the time of the ants who work and put food aside for the bad times. They are the people who have money in the bank to take advantage of lower cost assets. They can buy the house that is worth 10% less than a couple of years ago , they can buy the shares that now are at low prices but paying very good dividends,  in short they have provided for poor times and then they can take advantage of good opportunities  that are now available.

If we can teach young people one lesson out of this recession it should be to always have some money behind you in the bank as a backstop. Spend less than you earn and like the Scout motto “Be Prepared” for anything that life will throw at you. Money does not solve all problems but it sure does make dealing with problems easier. Having money behind you gives you choices about where you live and what job you might take, but mostly it gives you peace of mind and  the opportunity to live with dignity and not be dependant on handouts from the government or relatives.
We have had some welcome autumn rain and more will be much appreciated. The cold days certainly turn our minds to nice hearty soups, and warm slippers. This may be a bear rally that we have seen, but the trend is to the market rising, albeit slower than most of us would like. There is light at the end of the tunnel and from all we can research it is not a train coming towards us.

Keep warm, and fingers crossed for more rain,

Jen, Rose and Lina the Canine Receptionist

Jen’s Note, April 2009

You will find your reports this month a little more cheerful than the last few months. Now the Aussie share market seems to be trying to stabilise at between 3200 and 3600 and this is a positive sign, as it is doing so in spite of the continuing poor news from overseas.

Retails sales are down and we do seem to be saving rather than spending money which may not be so good in the short term for the economy, but it is to the benefit of all in the longer term. We still have major issues that are not occupying the minds of our governments at either state or federal level, with drought or the now very concerning lack of water for capital cities.

In our view, instead of handing out money to taxpayers to stimulate the economy, the Government would be better to issue Commonwealth Infrastructure Bonds that we all could invest in to build better water supply and much improve transport infrastructure. This would provide jobs and a real long term benefit to the nation. But I guess we face as usual politicians who are focused on getting their pet projects passed and winning the next election which will be along sooner than we all realise.

The financial data that is coming forward suggests that although we certainly are in a severe downturn and things may get a good bit tougher over the next few months, there are signs of improvement. The tragic bushfires and floods will give some stimulus to the jobs area so it does seem to be true that “every cloud has a silver lining”  although  it has been jolly hard on those who have had their lives wrecked.

We have been going through our cupboards to see what is in good condition that we do not need to pass on to our favourite charity the Salvation Army. In doing this I remember just why our family has always supported the Sallies. My grandmother’s brother served in both the World Wars, and Uncle Jack would often tell us of the great work they did at the front and at departure points for troops.. He used to tell us of a Sally officer appearing out of the dust and smoke to offer “a cuppa and a smoke mate, and can I post your mail for you?”

It was the caring and practical assistance that my uncle found so helpful; he was an ambulance driver for the Army and saw all the good that was done. Later I was involved during the 1960s in bushfires and again was so impressed by the practicality of the Sallies. I guess we all have our pet charities and that is a great thing, times like these give us all a reminder that although we think that times are bad for us there are many who would count themselves very fortunate to be as well off as we are.

Budgeting is becoming a popular subject of discussion and we are always happy to help with fine turning budgets so there is still some fun money available. It is quite obvious that many people have discovered their local library. There are lots of items like CD’s and DVD’s as well as books and magazines that can be borrowed. Our library has internet access that people can use as well. So different from when you had to whisper and look very respectable to borrow 5 books at a time. I can take out 25 items at once. So it is worth a look especially if you have special interests like knitting and other crafts, you can save a lot by not buying books but borrowing.

It is apparent now that many folk are losing their jobs, and  this is a very difficult thing to face especially if you have worked for the same firm for a long time. It is important to remember to go to Centrelink as soon as possible to check what benefits are available. Redundancy payments have special tax treatment and not getting  good advice as soon as you lose a job can cost you very dearly. Moss Financial has been dealing with redundancy since 1985 so are well experienced in making sure that the funds are used to the clients best advantage so that they can receive Centrelink as soon as possible and that they understand just what their tax liability is . We are also happy to network amongst our contacts to try to assist with finding new employment for those who have lost jobs.  The rules have changed regarding redundancy payments so what many people think are the options are not necessarily so.

We have noticed that some people interested in the Transition to Retirement Pensions. These are pensions where you take a pension from your super fund while still at work. This can be a good option for those who would like to take the opportunity to either work a shorter week or who would like to save into their super fund more than they are currently but still take home the pay they need to live on. There are some rules involved and some details need to be just so in setting these arrangements up. One is the wording of the document to the employer asking them to make the arrangement to salary sacrifice super payments. Failure to have the correct wording may cause the tax benefit to be disallowed.

We are always happy to help people get these details sorted as part of our ongoing service. We hope that you have had some rain at your place. We had a lovely downpour that has cheered us up enough to plant some winter veggies.

Well Easter is almost here and you will be pleased to know that Lina the canine receptionist has been looking after the Easter Bunny. She takes this responsibility very seriously as you can see. Minding the door is a big job as well, note the wagging tail.

Daylight saving has ended and we are pleased as Lina is not that keen on walking in the dark in the mornings. She wants to know what you humans do with all this daylight you save. She likes to go to bed early and the birds keep her awake, they are as bad as the possums pinching the quinces and banging around on the metal roof while they do so.
Home made soup time is near so we trust you all keep well.

Jen, Rose and Lina the Canine Receptionist