The latest edition of The Financial Fortnight That Was has been emailed to subscribers.  This edition looks at the role of exchange rates in investment decisions.  If you would like to receive this free email service go to the Sign Up page found on our website.

Please read on for the latest market news for the fortnight concluding Monday 29th October.

Another policy announced this week should provided some benefits to pensioners, self funded retirees, people with disabilities and their carers.  The Liberal Party have announced the following details:

• An increase as of March 2008 in the Utilities Allowance paid to those in receipt of income support to meet basic household bills like power and gas from $107.20 to $500 a year for a single and $500 for a couple.
• Utilities allowance extended to Carer Payment recipients and Disability Support Pensioners.
• Seniors Concession Allowance to be increased to $500 from June 2008.  This will particularly benefit self funded retirees who do not receive the Age Pension.

Regards,

Scott Keefer

As promised in our blog last week, we intend to provide details of policies announced during the election that affect financial planning strategies for the future.  Last Friday the Australian Labor Party announced their tax plans for the future.  The details of their plan are as follows:

In 2008-09

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $11,000 to $14,000.
• Start of the 30% threshold to increase from $30,001 to $34,001.
• Start of the 40% threshold to increase to $80,001.
• Start of the 45% threshold to increase to $180,001 (as promised in the budget in May).

In 2009-10

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $14,000 to $15,000.
• Start of the 30% threshold to increase from $34,001 to $35,001.

• Second top marginal rate to be cut from 40% to 38%.

From July 1, 2010

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $15,000 to $16,000.
• Start of the 30% threshold to increase from $35,001 to $37,001.
• Second top marginal rate to be cut from 38% to 37%.

The major difference from the Liberal Party policy is that the top marginal tax rate for those earning more than $180,000 will not be reduced from 45% to 42% over 2009 - 2011.

The Labor policy also announced  an Education Tax Refund to be funded by not reducing the top marginal tax rate.  All families who receive Family Tax Benefit (Part A) will be eligible for:

·                     A 50 % refund every year for up to $750 of education expenses for each child attending primary school (maximum $375 per child, per year).

·                     A 50 % refund every year for up to $1,500 of education expenses for each child attending secondary school (maximum $750 per child, per year).

Families would submit their application for this refund as part of their annual tax return.

Regards,

Scott Keefer

The Australian Bureau of Statistics (ABS) today released the September quarter Consumer Price Index data.  These statistics attempt to measure the inflation in prices in the economy.  The results show that the cost of the basket of goods used to measure price levels in the Australian economy has risen by 0.7% for the quarter and 1.9% for the year.  These are known as the Headline figures.

Breaking down this data, the ABS recorded the following significant movements in prices for the quarter.

Increases:

• fruit (+9.6%),
• vegetables (+7.9%),
• deposit and loan facilities (+2.2%),
• rents (+1.6%),
• other financial services (+2.3%),
• house purchase (+1.0%),
• electricity (+4.3%),
• overseas holiday travel and accommodation (+4.2%),
• property rates and charges (+4.5%),
• water and sewerage (+5.5%),
• domestic holiday travel and accommodation (+1.8%) and
• other motoring charges (+2.6%)

Decreases:

• child care (-33.4%), - as a result of the change in eligibility criteria for Child Care Tax Rebates
• automotive fuel (-3.7%),
• pharmaceuticals (-4.5%),
• audio, visual and computing equipment (-2.5%) and
• furniture (-1.5%)

However, the Reserve Bank of Australia's separate Consumer Price Measure, referred to as the core figures, showed inflation for the quarter at 0.9% and 2.9% for the year.  The Reserve Bank will look carefully at this data in deciding whether to raise, or lower, interest rates at the next board meeting on Melbourne Cup day - Tuesday 6th November.  With inflation at the higher end of the 2 to 3% rate targeted by the Reserve Bank many forecasters are predicting a lifting of the official interest rate.  This is clearly shown by the futures market who have priced in a 75% chance of a 0.25% increase to 6.75%.

There is bound to be a deal of nervousness when the decision is announced at 9.30am on Wednesday 7th.

Regards,

Scott Keefer

(To be taken to the Australian Bureau of Statistics data click here)

In this week's edition of Monday's Money Minute, Scott Francis breaks down the connection between inflation and interest rates and the possible affect that tax cuts put on the level of inflation.  Click here to be taken to the podcast.

We have updated our Building Portfolios web page to reflect 5 year investment returns up to the end of September 2007 for our preferred style of investments offered by Dimensional Fund Advisors.  The returns continue to reflect the premiums from investing in the small and value segments of both the Australian and international markets.  They look as follows:

Australian Shares

Average Annual Returns:

Growth of $10,000 Invested over the 5 years:

International Shares

This week's Monday Money Minute looks at private equity investments.  Scott Francis discusses  what they are, why investors might use them in a portfolio, issues to be cautious of in using them and how to get exposure to these style of investments.

Click here to be taken to the relevant page on our website.

The latest edition of The Financial Fortnight That Was has been emailed to subscribers.  This edition looks at the problems of Active Management.  If you would like to receive this free email service go to the Sign Up page found on our website.

Please read on for the latest market news for the fortnight concluding Monday 15th October.

Yesterday saw the election campaign start with tax cut promises from the Liberal party.  So what are the details?

In 2008-09

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $11,000 to $14,000.
• Start of the 30% threshold to increase from $30,001 to $34,001.
• Start of the 40% threshold to increase to $80,001.
• Start of the 45% threshold to increase to $180,001 (as promised in the budget in May).

In 2009-10

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $14,000 to $15,000.
• Start of the 30% threshold to increase from $34,001 to $35,001.
• Second top marginal rate to be cut from 40% to 38%.
• Top marginal tax rate cut from 45% to 43%.

From July 1, 2010

• Low Income Tax free threshold due to the Low Income Tax Offset to rise from $15,000 to $16,000.
• Start of the 30% threshold to increase from $35,001 to $37,001.
• Second top marginal rate to be cut from 38% to 37%.
• Top marginal tax rate cut from 43% to 42%.

To put some dollar amounts to these changes the tax payable (including medicare levy) would be:

Throughout the campaign we look forward to adding further commentary on any policy proposed by the major parties that will affect financial planning and investment strategies.

Regards,

Scott Keefer

Scott Francis has written another article for Alan Kohler's Eureka Report.  The article highlights that investing through index funds and ETFs, with a focus on growth areas, means working with the market, not against it.

The article points out the failures of active management based on reasearch including:

• Actively managed funds have a strong tendency to underperform the average market return.
• The buying and selling undertaken by personal investors destroys investment returns.
• Analyst research does not seem to lead to above-average returns for investors.
• Poor decision making by investors in determing when into and sell out of asset classes.
• The tendency of investors to sell in falling markets and buy in strongly rising markets.

Scott concludes by identifying how investors can avoid these below average market returns.  For the details please take a look at the article on our website.  Click here.

Regards,
Scott Keefer

Scott Francis this week discusses the poor peformance of the major managed funds with all but one fund beating the average market return.  Well worth a listen for those who are using or are contemplating using actively managed funds to invest.  To listen to Scott's analysis please click on the link that follows.  Click here

Alan Kohler's Eureka Report has published an extract from Scott Francis' new book - High Income Investing - How to be Relaxed and Comfortable.  The extract looks at listed interest rate securities.  Well worth a read if you currently invest in these type of securities or ar considering this option.

Regards,
Scott Keefer

The latest edition of The Financial Fortnight That Was has been emailed to subscribers.  This edition looks at Listed Investment Companies.  If you would like to receive this free email service go to the Sign Up page found on our website.

Please read on for the latest market news for the fortnight concluding Monday 1st October.

Regards,

Scott Keefer