KEVIN Rudd has warned of economic disaster from a looming wave of retirees unless Australia embraces a decade of nation building and workforce reforms.The Prime Minister yesterday foreshadowed a shake-up to remove workforce barriers and lift workforce participation – themes likely to be central to a planned overhaul of the taxation system.
Revealing findings of the third Intergenerational Report, Mr Rudd said that, by 2050, there would be only 2.7 people of working age for each person aged 65 years and older, compared with 7.5 people in 1970 and five-to-one this year. Within 40 years, the proportion of the population aged 65 years and older would almost double to 23 per cent.”Unless we make big changes, we will either generate large, unsustainable budget deficits into the second quarter of the century or else we will need to reduce government services – including health services – as the needs of an ageing population become greater,” Mr Rudd said.”At a national level, public finances will be burdened with the increased costs of looking after the needs of older Australians in health, aged care and age pensions. But with a smaller proportion of Australians in the workforce, tax revenues wont keep pace with those rising costs.”
The Prime Minister warned that working families would feel the impact, with slower economic growth holding back increases in wages.”Average family incomes will grow at a slower rate than weve become accustomed to.”The Prime Minister said that removing work barriers for women, getting the unemployed into work and introducing paid parental leave would help minimise the impact of the nations ageing population, but it would not be enough to reverse an economic crisis.”Even with all these measures, workforce participation will fall over the next 40 years, from its peak of around 65 per cent now to around 60 per cent by 2050,” he said.Despite Australias resilience to the global financial crisis, Mr Rudd said Australias productivity growth could not match the 2 per cent recorded during the Hawke-Keating governments.
Last decade, it fell to 1.4 per cent.”If we let this trend of lower productivity growth continue, Australia will struggle to meet the major challenges facing our economy in decades ahead,” Mr Rudd said.He said raising productivity growth to 2 per cent would mean every Australian would be $16,000 a year better off.Mr Rudd, speaking at an Australia Day function, did not give specific examples of new policy, but said productivity would be boosted by current programs, including pumping $18 billion in roads, rail and ports; doubling investments in schools over five years; building a national broadband network and cutting red tape for business.
via Nation building plan to offset ageing population – Kevin Rudd | The Courier-Mail.
Prevention is better than cure!
Do you remember when the GST was introduced into Australia? It was July 2000. Since then, most working singles and couples could have managed to secure (at least) half a dozen well researched residential investment properties. If you did this; congratulations! No doubt, with falling interest rates and a seriously growing housing shortage… the global slowdown would be delivering you more benefits than challenges right now!
Reaction is all too common! Why wait for drastic times to push us to those “drastic measures” that the politicians keep spruiking?
Doesn’t it make more sense to conduct our financial affairs during the good times in preparation for those drastic times… that always find us sooner or later?
Now while we can’t change the past, it is unwise… perhaps irresponsible… not to learn from it!
More…
The average value of a new mortgage in Australia has risen to its highest level as property investors return to the market, the country’s biggest mortgage broker says.
The average new mortgage lodged in Australia rose to A$354,137 ($442,813) in July, eclipsing the previous record of A$353,223 in October last year, according to mortgage broker AFG. “As every week goes by we’re seeing growing signs of confidence in the property market,” general manager of sales and operations Mark Hewitt said. “Recent reports of house price increases are stimulating the market as a whole and encouraging investors.”
The data showed 30 per cent of mortgages were arranged for investors, rising from a low of 24.5 per cent in March, whereas new home buyers made up 19 per cent of the mortgage market in July, a proportion that had fallen from 28 per cent in March. Also, the proportion of fixed rate mortgages fell to 5 per cent from 8.3 per cent in June. – AAP
Peter Switzer comments on Finance @ Yahoo7
“Every time I interview Australia’s academic bear – Associate Professor Steve Keen from the University of Western Sydney (he predicted a 40% slump in real estate prices in Australia) I always need a positive booster to remind me that the Australian economy is an out-performer and looks poised to beat the global worst case scenarios put forward by other bearish or negative economists.”
The Good News
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AUSTRALIANS Love Property
Not only do we have one of the highest home ownership rates in the world but we also have one of the highest investment rates in the world.
Last year, more than 1.4 million people claimed rental deductions against their tax returns, and 200,000 firsttime property investors are expected to swell that number to 1.6 million this year.
While negative gearing, claiming your losses and cutting your costs are all allowed under our tax system, there are still a high number of mistakes made every year when it comes to property returns. The Australian Taxation Office says more than $25 billion was claimed in deductions on rental properties last year, making real estate one of the largest sources of claims.
Frank Brass, a director of tax company H&R Block, says one of the biggest expenses and often the area where the most mistakes are made is claiming interest paid on borrowings. “If you use some of the money for private expenses, then the interest amount has to be worked out pro-rata – a very expensive process to get your tax agent to do,” he says.
http://www.news.com.au/business/money/story/0,25197,25806877-14327,00.html
Martin comments – I have learnt over the past few years that having a great property is only part of a successful investment. We have seen many people with good properties “in trouble” because they did not set up their accounts and loans properly. Mixing private and investment expenses on the same account , as mentioned above, is one of the common mistakes made. As experienced investors we can show you how we manage those issues for ourselves.
Australia is experiencing a population boom not seen since the 1960s – but it is not a baby boom.
High levels of immigration are fuelling record population growth.
Australia’s headcount increased by almost 400,000 last year to 21.5 million, fresh data from the Australian Bureau of Statistics (ABS) shows. More than half of the new arrivals, or just over 230,000 people, were immigrants. The rest were babies born in Australia. The federal government this week moved to reduce immigration, cutting the skilled migrant intake by 14 per cent in response to the economic crisis.
The rate at which the population is growing has surged 50 per cent over the last five years. It is now growing at just under two per cent a year. “The last time Australia experienced higher growth rates was in the 50s and 60s as a result of post war migration and high birth rates,” the ABS said in a statement.
Western Australia and Queensland attracted the most new people in the year to September 2008. Tasmania was spurned.
For people moving within Australia, Queensland was the mecca, while people from NSW appeared keen to leave their state.
Cathy Alexander, Sydney Morning Herald
March 18, 2009
Australia has about 1.6 million individual residential property investors, according to the Australian Taxation Office – and most of them would be pretty happy.
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March 18, 2009
Australia experiences high population growth: Australian Bureau of Statistics (ABS)
Australia is continuing to record high population growth, according to figures released today by the ABS.
A total population growth rate of 1.8% was recorded for the year ending September 2008, up from the 1.2% recorded five years ago. The last time Australia experienced higher growth rates was in the 50’s and 60’s (above 2%) as a result of post war migration and high birth rates.
As at 30 September 2008, Australia’s population had grown to 21,542,000 an increase of 389,000 people over the previous year. Australia’s net overseas migration contributed to more than half of this growth at 61% or 235,900 people. Natural increase (the excess of births over deaths) contributed 153,400 (39%).
In the same period, Western Australia continues to record the fastest population growth at 2.9%, followed by Queensland (2.5%), the Northern Territory (2.2%), Victoria (1.8%), the Australian Capital Territory (1.4%), New South Wales (1.3%), South Australia (1.1%) and Tasmania (0.9%).
Queensland and Western Australia received the most people from net interstate migration, gaining 22,700 and 5,600 people respectively from the other states and territories. The states that lost the most people to interstate migration include New South Wales (down 22,400), South Australia (down 4,700) and Victoria (down 2,400).
Last week the Reserve Bank of Australia (RBA) made the decision at it’s monthly board meeting to leave the official cash rate on hold. That means no adjustment to interest rates this month.
But Did The RBA Get It Wrong?
It will be interesting to watch what they do with interest rates in the months ahead. Their actions will be an indication of whether this months decision to leave rates on hold was the right one or not.
At the beginning of 2008 the RBA put interest rates up twice. At the time the opposition argued that the decision to do so was wrong and a reaction to Kevin Rudd & Wayne Swan talking up inflation; citing it as the # 1 enemy to go after. What they failed to recognise was that the negative economic impact coming out of the USA had already begun to work its way through the system and here in Australia the economic slowdown was just about to bite.
The numerous interest rate cuts later in the year is clear evidence that monetary policy in the early part of 2008 was wrong.
More…
The following graph shows the history of interest rate movements in Australia from March 2001 to March 2009. The official cash rate currently stands at 3.25 per cent, which is a 45 year low.
Some people are simply confused right now. They have heard so many mixed messages in the past 18 months that they are unsure if now is a good time to step out and invest… or hold back and minimise their commitments.
If that’s you, don’t stay confused. It’s only when we have the right information that we can make fully informed decisions.
- Keep asking questions
- “Lash out” and have us prepare a Finance Structure & Cash Flow Health Check (there’s no cost anyway)
- Explore your retirement possibilities; not based on what you have done to date but what is possible in the next 7 to 10 years
To have us assist you, click here
Happy Investing,
Nick Lockhart
mrd Customer Care Program… because investing is personal
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