The past few months have brought with them strange and uncertain times as Australia, and the world, knuckled down and stayed inside in an effort to stop the curve of the COVID-19 pandemic.
With the arrival of July signalling that we are officially halfway through 2020, we wanted to take the time to share our thoughts on the latest financial developments that may impact on your financial world.
This Q&A from your team of financial experts covers the following topics:
In Australia, according to Domain, a recession is defined as contractions in economic growth over two consecutive quarters. The Australian economy shrank by 0.3 per cent in the March quarter, with economists, the Treasury and the Reserve Bank all expecting the June quarter to be the worst since the 1930s due to the ongoing impacts of COVID-19 on Australian businesses.
In early June, Treasurer Josh Frydenberg announced that Australia had officially entered its first recession since the 1990’s following two quarters of negative economic growth. As some may have expected, the recession has been attributed to the effects of the COVID-19 pandemic in Australia and the devastating bushfires affecting many communities across Australia before it.
While some believe Australia’s first recession in 30 years will be short as the nation slowly begins to recover from the effects of the pandemic and the Federal government implements a number of stimulus packages, the major fear of many economists over the coming weeks is the loss of jobs.
Currently, economists in Australia believe that the unemployment rate will jump from the current 5.2 per cent to at least 11 per cent. And with many Australians already struggling with the loss of their jobs or the fear of becoming unemployed due to COVID-19, it’s likely that many will begin to cut their spending, which in turn may lead to a worsening of the recession.
We understand that the news of the recession may cause you worry over how it may affect you and your financial journey to achieving financial success and security. So, as your expert financial partners, we thought we’d break down exactly how a recession may affect you or your loved ones.
With the last recession in Australia occurring nearly 30 years ago, it’s likely that not many of you remember its effects. However, for those of you who are older with adult children just beginning to enter the workforce, you may be worried about how the recession will impact on them.
With a recession comes little wage growth and a lack of jobs, especially for those who may just be graduating from university and seeking to enter the workforce with limited experience.
Unfortunately, research suggests that the new generation of workers will be the worst affected by the economic effects of the COVID-19 crisis and resulting recessions. In fact, it is projected that the demographic entering the workforce now will experience wage loss of more than $7 billion over the next decade.
So what can you advise your children or younger loved ones to do to weather this uncertain financial period?
Just like every generation, advising your kids to improve their financial literacy and seek the help of a financial expert can ensure they are maximising their savings capacity with the income they receive. Younger workers should also try to be more proactive in their career progression by actively seeking out opportunities for advancement and wage growth.
A recession can affect a number of aspects of you or your loved ones’ financial worlds.
We mentioned it before, but rising unemployment and low wage growth is a common result of a recession. This could prompt you to reconsider your financial goals and the timeline it may take you to achieve these goals.
A recession may also affect the property market, with experts warning current homeowners to expect a sharp fall in prices in the months to come. If you are concerned about this fall and its impacts, your financial advisor is ready and willing to help you review your current financial situation and get you back on track to achieving financial success if you need it.
On the other hand, for those with a secure income and a deposit already saved, this fall in the property prices may provide an ideal opportunity to break into the market. The same can be said for those who were thinking about purchasing an investment property; the fall in the property market may enable you to purchase a property that was previously out of your price-range before.
If you’d like to discuss how the recession may affect you and your financial world personally, don’t hesitate to contact your financial advisor today and we’ll be happy to answer all of your questions.
We understand that the announcement of the recession may have you wondering about whether you’ll still be able to achieve your financial goals or whether you should reconsider your current financial plan.
While it would potentially be unrealistic to say that the effects of the recession, and COVID-19, won’t affect you or your retirement plans at all, any delays that may occur can be discussed with your financial advisor to find the right path forward for your particular needs.
As your dedicated team of financial experts, we wanted to take the time to reassure you that if you have any concerns about your financial world or your financial journey, we are here to help. In fact, it’s our aim to work with you to ensure that you’ll always be on track to achieve every single one of your financial goals.
While the recession may mean that you aren’t able to achieve these goals as you originally had planned, we’ll be here to help you identify a new path forward and make sure that you’ll be continuing to progress on your financial journey – no matter what.
If you’re worried about how the recession may impact your financial journey, don’t hesitate to reach out to your financial advisor now. Remember: expert financial guidance and support is only an email or phone call away.
In an effort to boost the economy in the wake of COVID-19, the Federal Government recently announced eligible Australians could receive a grant of $25,000 to build or substantially renovate their homes.
The idea behind this new HomeBuilder scheme, as it has been dubbed, is to increase demand in the construction sector and keep builders employed as Australia faces its first recession since the 1990s.
However, just like many aspects of your financial world, who is eligible to receive this $25,000 grant is more complicated than it may first appear.
For example, there is a means-test involved in determining eligibility, with couples making more than $200,000 per year and individuals making more than $125,000 being excluded from being able to receive the grant. Successful participants will also need to spend a minimum of $150,000 on renovations to be eligible while those building a new home can’t spend more than $750,000.
In order to help you understand how the HomeBuilder scheme could fit into your financial plans, we’ve broken down the topic and answered your questions.
Unfortunately, the benefits of the HomeBuilder scheme are aimed at owner-occupiers of a property. As it currently stands, you will not be eligible for the HomeBuilder scheme if you were intending on using the grant to renovate your investment property. You also won’t be eligible if you were planning to renovate on your own without the help of builders.
However, if you had planned to renovate both your principal place of residence and your investment property in the coming months, the HomeBuilder scheme may help you to achieve those goals.
For example, you could apply for the HomeBuilder grant for the renovations for your principal place of residence and, if you’re successful, use your newly freed cash flow the grant affords you to renovate your investment property.
Your financial advisor will be able to help you identify the options the HomeBuilder scheme may grant you. All you have to do is get in touch.
If you’re a current homeowner looking to renovate your current principal place of residence, you’re in luck! The HomeBuilder scheme was designed to help those just like you achieve their renovation goals.
You will be able to access the HomeBuilder grants if you meet the following conditions:
Renovating can have a number of benefits, both financially as it improves the overall value of your home and for your lifestyle. If you’d like to know more about whether renovating your home is right for you, and if the HomeBuilder scheme could benefit you, your financial advisor can work with you to assess your options and help you decide.
According to the current conditions, the HomeBuilder can only be used for renovations to the building of your principal place of residence itself. Renovations should improve the accessibility, safety or livability of your home, such as renovating kitchens or bathrooms.
However, you will not be able to apply for the HomeBuilder scheme if you’re intending to use the grant to renovate structures outside of your main property. These include things like swimming pools, tennis courts and sheds, just to name a few.
You will also need to sign the contract for the beginning of your renovation work between the 4th of June 2020 and the 31st of December 2020 and the scheme requires that you have no special relationship with the contractor you’ve hired. This means that your contractor cannot be a relative or have any other sort of tie to you personally.
We mentioned it before but if you’re unsure about how the HomeBuilder scheme applies to your particular financial circumstances, your financial advisor is more than happy to help you review your options. A member of our team can also put you in touch with a member of our expert partner network if you require more specialised knowledge.
It’s no secret that for many members of the My Wealth Solutions community – and Australia as a whole – the continued effects of COVID-19 has impacted many aspects of your financial world.
And as we as a community and a nation begin to move forward, we at My Wealth Solutions understand that you may be worried about what the path ahead looks like for you.
That’s why we just wanted to take the time to reassure you that we are here to help – no matter what comes your way.
After all, our aim is to ensure you always have the expert information and professional financial guidance you need to continue making smart financial decisions on your journey to achieving financial success and security.
That’s why we’ll always only be a phone call or email away, to provide you with said expert guidance whenever and wherever you need it.
With that in mind, If you’re concerned about any aspect of your financial world or anything contained in this Q&A, don’t hesitate to get in touch and a member of our team will be happy to help.
We hope this resource gave you a start in tackling the financial challenges you may be facing.
If you’d like guidance tailored specifically to you and your particular needs, we’re here to help.