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Ten tips for setting a good budget

To put you on the path to building your wealth you need to start saving money. This may mean working out how to find more money. The best way to do this is to set yourself a budget.

Setting a budget is important for everyone no matter your age or how much money you have. It is especially important for people who are struggling to meet their goals or who keep building up debt.

A budget is not about just cutting expenses. It is about finding a good balance between your income and your expenses and deciding what is important to you so that you have money left over to save.

A budget is not a fixed forever plan. You can continue to make adjustments over time until you reach a comfortable outcome and have a good strategy in place that will meet your goals.

There are two sides to a budget:

Your income – includes income from all sources such as salary, interest, rental income and dividends, but only include your regular income and make sure you use after-tax income or allow for tax payable in your expenses.
Your expenses – includes mortgage repayments, bills and general living expenses.

Tip

Go through the following documents to check you have captured all of your income and expenses:

Bank account statements
Credit card statements
Pay slips (for both income and deductions)
Cheque book details
Expense receipts
Bills and insurance certificates

You could also consider keeping a diary to record all your expenses – and don’t forget all the little ones as this is where you can often make some significant savings.

Setting a budget is a simple step but sticking to the budget can be harder.

Below are ten tips for setting a good budget:

Make it realistic or you will never stick to it
Budget an amount for fun, leisure and personal expenses so you can avoid impulse buying
Save your pay rises, bonuses, special payments or tax refund
Look for small savings – for example, take your lunch to work, or use internet banking to reduce bank fees.
Pay by cash or EFTPOS to avoid credit card fees (and also avoid accumulating debt)
Reduce fees and charges – combine bank accounts to reduce fees
Put your change into a savings jar at the end of every day
Shop around and compare prices on insurance policies. Look for companies that offer discounts for multiple policies
Use lay-by options instead of debt and credit cards
Update your budget each year

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

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The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.

Disclaimer

All statements made on this website are made in good faith and we believe they are accurate and reliable. Macarthur Wealth Management does not give any warranty as to the accuracy, reliability or completeness of information that is contained in this website, except in so far as any liability under statute cannot be excluded. Macarthur Wealth Management, its directors, employees and their representatives do not accept any liability for any error or omission on this website or for any resulting loss or damage suffered by the recipient or any other person. Unless otherwise specified, copyright of information provided on this website is owned by Macarthur Wealth Management. You may not alter or modify this information in any way, including the removal of this copyright notice.

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Investor confusion reigns

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MARKETS

Local and global equity markets were mixed this week with investors pummelled by an influx of extremely fluid news flow including conflict, inflation, central banks and rates, and floods.

In local stock news, CSL announced it would waive its original 80% acceptance rate condition and declare its $16 billion takeover of Vifor Pharma a success, after gaining more than 74% in the takeover target. Swiss government approval is still required.

Insurers have been informing the market of their claims from the floods and storms that battered parts of the NSW and Queensland since late February. IAG has revised its total claims expense estimate for the event to $74 million, down from $95 million, due to work on earlier claims.

Oil prices had an extremely volatile week, soaring to $130 a barrel amid supply shortage fears as the US and allies looked to cut off Russian oil and gas. The oil price then fell sharply on peace hopes, before rising again with the UAE stating it will call on its fellow OPEC+ members to boost oil output faster. But the oil price finished the week lower as the UAE call was tempered hours later by their energy minister and high US inflation data set off fears of economic contraction.

ECONOMIC

New Australian labour market data showed demand for workers spiked after the most recent virus wave receded, with the ANZ job advertisement series jumping 8.4% in February to be 31.5% higher than a year earlier.

Australian consumer sentiment fell again in March, with the reading below 100, indicating that pessimists outweigh optimists. Rising inflationary pressures are weighing on sentiment, along with recent floods, Russia/Ukraine conflict, and the prospect of higher mortgage rates.

The February NAB business survey showed a strengthening in business conditions and confidence as new virus cases declined from their early January peaks.

Reserve Bank governor Philip Lowe said surging oil prices would produce annual inflation of 4% in Australia this year, above the Bank’s 2-3% target.

The US central bank chairman has confirmed plans to back a 0.25% rate increase at the March meeting, with the Russia/Ukraine conflict impacting how hard they can go on rate rises in contrast to unrelenting inflationary pressures. The chairman did indicate that he was prepared to raise rates by more than 0.25% in a meeting or meetings if inflation doesn’t subside later this year as expected.

US jobs rose by 678,000 in February, coming in well above expectations. The unemployment rate fell from 4% to 3.8%, the lowest in 2 years. Average hourly earnings were flat in the month with the annual rate falling from 5.5% to 5.1%.

US inflation reached a new 4-decade high in February, with the consumer price index up 7.9% from a year earlier. Markets concerned that sustained inflation and lower economic growth could see a period of stagflation.

The European central bank kept their interest rates unchanged but surprisingly sped up their reduced asset purchasing schedule for the coming months, stating that the program could end in the 3rd quarter if the medium-term inflation outlook will not weaken.

China announced an economic growth goal of about 5.5% for 2022, it’s lowest target since 1990, but still at the higher end of many economists’ estimates. The higher than expected number, if achieved, could provide a boost to the global economy.

POLITICS

Sanctions and corporate boycotts on Russia have continued this week as part of a broader retreat by global corporate giants. In response, Russia has threatened to cut natural gas supplies to Europe. The US secretary of state said the US and its allies were looking at a coordinated embargo on Russian oil and gas, whilst ensuring appropriate global supply. Problem is where to get the additional supply from…. Venezuela or Iran….

China will continue its crackdown on monopolies to ensure fair competition according to their Premier. He also singled out integrated circuits and A.I. industries as priority areas for the government to build up domestic capabilities. President Xi said China could not rely on international markets for food security and should focus on domestic production and farmland protection.

The US House passed a long-delayed US $1.5 trillion spending bill that would fund the government through the rest of the fiscal year, with emergency coronavirus funding stricken from the bill. The bill also approved US$13.6 billion in emergency spending for the US response to the war in Ukraine.

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RUSSIA INVADES, SANCTIONS TO FOLLOW

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MARKETS

Local and global equity markets weakened this week as escalating European tensions saw Russian troops enter Ukraine.

In local stock news, Magellan reported a net profit after tax of $251.6 million for the 1st half, an increase of 24% on the prior period, whilst the company declared an interim dividend of $1.10 per share, up from 97c. The fund manager is considering an on-market share buy-back.

AGL Energy has rejected a surprise $3.54 billion takeover approach from billionaire Mike Cannon-Brookes (Atlassian) and Canada’s Brookfield Asset Management in favour of a plan to split in two this year. A tech guy running an energy company……what could go wrong……

QBE Insurance reported a net profit of US$750 million for calendar 2021, compared with a US$1.5 billion loss in the previous year. Investors were unconvinced by the result.

Super Retail Group had first-half profit fall 35% and warned higher freight and transport costs will continue to affect margins, with lockdowns and higher costs contributing to the weaker result.

Telstra and TPG will share their regional networks in what they claim will provide better service to people outside of major cities. The two companies revealed a 10 year network deal which will improve coverage without the need for costly network rollouts.

Coles reported a better than expected performance for the 1st half of its financial year but rising costs from covid wiped gains from improved sales. Woolworths reported lower 1st half profit due to virus-related costs with the company warning that it’s inevitable food prices will rise.

Seven Group improved 1st half earnings and is banking on its large stake in Boral to deliver better full year numbers. The company posted a 21% increase in net profit, which doesn’t include the 69% stake acquired in Boral.

Rio Tinto reported an improved full year profit of US$21.09 billion and announced a special dividend of US62 cents per share, which will be paid in addition to the final dividend of US$4.17 per share.

Scentre Group returned to full year profit benefiting from an uptick in property valuations. Net profit after tax was $887.9 million, with revaluation gains of $81 million. Investors will receive a higher distribution.

Oil prices surged above US$100 a barrel for the first time since 2014 following Russia’s invasion of the Ukraine before settling back down to trading levels earlier in the week on news that the US is considering a potential release from its strategic oil reserves in coordination with allies.

The Australian dollar fell this week as is normally the case when global risks rise, investors seeking out safety in the Japanese Yen, Swiss Franc, and US dollar.

ECONOMIC

CBA lending data for January showed that growth in new lending for housing eased, primarily driven by owner-occupiers, whilst higher fixed borrowing rates saw a decline in the share of fixed rate lending. Consumer lending growth softened whilst business lending growth remains solid.

A key Australian consumer confidence index fell 1.4% despite the easing of virus restrictions and re-opening of international borders, with concerns regarding inflation hitting home for consumers. The drop in confidence means household spending might be weaker in the period ahead.

Australian construction data showed that building work done fell by 1.7% in the 4th quarter because of a 3.7% fall in private sector residential work. Work completed on renovations also eased in the quarter but remains at a high level. Engineering work completed lifted driven by stronger public sector activity.

Australian wages rose by 0.7% in the 4th quarter, with the annual rate stepping up to 2.3%. Both private and public sector wages grew at the same pace in the quarter. Including bonuses, the annual rate lifted to 2.8%, but remains below headline inflation numbers. The labour market has tightened again over the last few months.

The volume of capital expenditure in Australia rose by 1.1% in the 4th quarter, with mining investment increasing by 2.6% and non-mining investment increasing by 0.5%.

A private US data firm said its manufacturing data rose to a 2-month high in February, suggesting the US economy regained momentum.

Prices charged for goods and services in the Euro area jumped by a record amount in February as an easing of pandemic restrictions led to a strong rebound in economic activity.

China’s central bank has kept its benchmark lending rates unchanged in February, in line with market expectations, after cutting rates a month earlier.

Hong Kong will boost support for consumers and the unemployed by allocating more than US$6 billion as a covid outbreak dents the economy. The government has banned travel from several countries, closed schools, and imposed a range of other restrictions.

POLTICS

Russia invaded Ukraine after 2 regions close to the Ukraine/Russia border declared themselves autonomous or independent, thus seeking support from Russia whist on Ukrainian land. Not a smart move from the Russians as sanctions could become crippling, but equally damaging for the West in terms of embarrassment and the sanctions that will now follow which will add further pressure to current high oil and gas prices and broader inflation. Sanctions could also force the US to reluctantly enter into a nuclear deal with Iran to ease oil supply concerns. China said it opposes the sanctions and called US actions “immoral”.

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Equity markets mixed as relief rally soured by US tech sell-off

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MARKETS

Equity markets were mixed this week as a strong rally earlier in the week was soured by US tech sell-off and more hawkish comments and action from both the European central bank and the Bank of England.

Reported 4th quarter US corporate earnings have continued to come through stronger than expected, with 78% of companies beating analyst estimates and more than 80% having met or beat expectations. Analysts are expecting that profits from companies in the S&P 500 rose 24% in the quarter from a year earlier.

Money markets are now expecting almost 5 interest rate increases from US Fed this year and 4 from the Bank of England. There’s also speculation that the US Fed might front-load hikes by increasing rates in larger increments, which Fed officials have poured cold water on. All will largely depend on inflation dynamics from here but will also be a function of what interest rate level the economy and markets can absorb and withstand.

In local stock news, Telstra has announced it will spend up to $1.6 billion on two projects over the next 5 years. The spending is projected to provide a $200 million earnings contribution by 2026.

Westpac has reported a net profit of $1.82 billion in the December quarter, up 80% on the quarterly average for the 2nd half of 2021. Cash earnings were up 1%, but the net interest margin declined 8 basis points to 1.91%. Total loans increased 0.7%.

Sydney Airport shareholders have voted for a $23.6 billion takeover bid from a consortium of investors, with shareholders to receive $8.75 per share.

Oil prices moved higher this week after OPEC+ stuck to planned moderate output increases (400,000 barrels per day) despite pressure from customers and consumers to raise output more quickly. The group has blamed rising prices on the failure of consuming nations to ensure adequate investment in fossil fuels, whilst Russia/US tensions also haven’t helped.

The Aussie dollar rose as the US dollar took a tumble after both the European and England central banks turned more hawkish in their rhetoric and actions.

ECONOMIC

The Reserve Bank of Australia left rates unchanged at 0.10% but announced an early finish to their quantitative easing (money printing) program, giving the bank the green light to begin raising rates. The bank made it abundantly clear in their statement that they’re in no rush to raise rates, but markets are currently predicting a rate lift-off in either June or August. Inflation, particularly wage growth, will be key.

Australian private sector credit rose by 0.8% in December to take the annual rate to 7.2%, the strongest rate since November 2008. Both housing and business credit were strong, whilst personal credit fell in December and remains well below levels a year ago.

Australian retail trade fell by 4.4% in December affected by virus issues, falling more than consensus estimates, but remains at near record levels. Food retailing was the only positive, with large falls coming from department stores, clothing & footwear, and household goods.

Australia’s trade surplus narrowed in December as imports rose strongly in the month relative to exports. Exports were mixed, with iron ore rising strongly and reasonable growth from wool and meat, whilst coal fell sharply as did other rural exports. Imports were boosted by strong gains across all the goods categories.

Australian building approvals rose strongly in December, boosted by a surprising lift in multi-unit approvals. In contrast, private detached house approvals fell as momentum continues to slow. Over the past year, the number of approvals is lower by 7.5%, however, alterations & additions approvals remain elevated.

US data showed that the central bank’s preferred measure of inflation rose at 4.9% in December over the prior year, pushing well above the bank’s target.

A separate measure showed US employers spent 4% more on wages and benefits over the past year, an increase not seen since 2001, as a tight labour market encouraged workers to demand higher pay. However, employment costs didn’t rise as much as expected in the 4th quarter easing concerns that wages are advancing too quickly.

US consumer spending fell in December as rising prices and virus fears took their toll.

US manufacturing activity slowed in January, from December, but remained in expansionary territory. Supply chain impediments caused by virus health policies were among the issues that weighed on activity.

The Bank of England voted by a majority 5-4 to increase the cash rate by 0.25% to 0.50%. Members also voted unanimously for the bank to begin to reduce the stock of UK government bond purchases by ceasing to reinvest maturing assets – i.e., reduce the size of their balance sheet by taking the liquidity away they previously provided via money printing. They will also begin to unwind the stock of corporate bond purchases.

The European central bank maintained key interest rates at record low levels in February and pledged to steadily reduce its bond purchases (money printing) this year. Rate rises are unlikely in 2022.

China’s economy continued to slow at the start of the year with manufacturing output slipping and Covid-zero policies curbing consumer spending.

POLICTICS

Russia/US tensions continued to rise this week with Russia maintaining they have no plans to invade and Ukraine trying to calm tensions on all sides. US lawmakers are apparently close to finalising the language for a sanctions bill that could include some penalties even if Putin doesn’t invade. The US has also given the green light to move troops from the US to Europe and to move troops within Europe closer to the Russia/Ukraine border.

Some 300,000 Australian fossil fuel jobs could be wiped out through declining international demand for fossil fuels, new modelling predicts. There’s a widely held belief that those job losses will be easily absorbed, but that doesn’t appear to be apparent with renewable sources of energy largely developed using automation. The job losses will disproportionately impact regional centres. Job transitions and retraining are never easy.

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Markets buoyed by US stimulus bills

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Local and global equity markets rose strongly this week buoyed by strong company earnings results, the passage of the US infrastructure bill, and progress on the bigger budgetary bill.

Analysts now expect 2^nd quarter profit growth of 93% for the 500 largest US companies. With their quarterly reporting season almost complete, 87% of companies have beat analyst expectations, which is the highest beat on record.

In local stock news, general insurer Suncorp improved full-year cash earnings by 42% with shareholders to receive a special dividend, whilst the company will also undertake an on-market stock buyback.

Toll road operator Transurban revealed that the costs of the West Gate tunnel project in Melbourne have blown out by about $3.3 billion. The company reported statutory profit of $3.27 billion. Lockdowns in Sydney, Brisbane, and Melbourne have reduced the number of cars on the road and have weighed on revenue.

Commonwealth Bank of Australia released its 2021 financial year results reporting a $1.4 billion increase in cash profit to $8.7 billion over the last 12 months, an almost 20% increase. The bank also announced a $6 billion off-market stock buy-back.

The gold price had fallen sharply over the last week and half before mounting somewhat of a recovery in the last few days. A stronger US dollar along with the continuing economic recovery and expectations of the US central bank paring back its stimulus program have all put downward pressure on the gold price of late.

The iron price has continued to fall from its lofty heights following a report which said that China wants to limit steel makers’ impact on its environment, which made investors reassess their expectations for iron ore demand.

The Reserve Bank of Australia has revised its economic growth forecast down to 4% for 2021 but has kept their forecast for unemployment at 5% for the same period. They did revise their unemployment forecast for 2022 down to 4.25% and left their inflation forecasts unchanged at 1.75% for 2022 and 2.25% for 2023.

The negative impact of lockdowns have begun to rear their ugly head, putting aside the societal issues, as more than 15,000 home and business owners were unable to repay their loans in July. In addition, an additional 150,000 Australians became unemployed last month according to Roy Morgan. Their latest data showed the bulk of the job losses came from part-time work whilst 61,000 full-time workers also became unemployed. 619,000 workers are now looking for full-time work whilst 803,000 are looking for part-time work.

July saw the National Australia Bank business confidence index and business conditions fall sharply, which isn’t surprising given the size and extent of lockdowns in a number of states. Australian consumer sentiment fell by more than 4% in August as consumers’ fears of unemployment rose sharply.

US consumer prices for July rose at its slowest pace in the past 5 months as some price increases have subsided on the back of softening demand and increased supply. Even so, the July inflation number of 0.5% is still quite high, with the annual rate at 5.4%, as demand pressures and supply issues remain.

US nonfarm payrolls increased by 943,000 jobs last month a Labor Department report showed. Economists had forecast payrolls would increase by 870,000. The report also showed strong wage gains as employers competed for scarce workers as many workers remain at home collecting overly generous unemployment benefits. The unemployment rate also dropped to a 16 month low.

The US central bank had contrasting rhetoric from a couple of members this week with one suggesting that the US should be well past the pandemic crisis before the central bank raises rates. Another member said high inflation this year may have already met one of the bank’s benchmarks for raising rates.

The Germans have again warned that inflation in the Euro area could pick up faster than expected and urged the European central bank not to drag out their emergency bond-buying program.

A gauge of investor expectations for the German economy plunged to 40 from 63 points in July as fears about the impact of the delta variant gather pace.

Chinese economic data showed exports rising by 19% in July on the same time last year, coming in just under expectations, whilst imports were up 28% on the same time last year, also coming in below expectations.

China’s central bank has fanned expectations of further monetary policy easing, saying in its latest quarterly report that inflation pressures are controllable whilst highlighting risks to the economic growth outlook.

The US Senate voted to progress the US$1 trillion infrastructure bill with 19 Republicans voting with Democrats to support the push. However, the Democrat leader of the House has said she will only bring the bill to a vote after the Senate passes a separate US$3.5 trillion bill which has all kinds of things in it, most of it Democrat election promises, which the Democrats will likely look to push through via a process called reconciliation (ie. without Republican support). The debt ceiling (currently at US$28.5 trillion….) with partisanship likely to make it a tough task.

The Biden administration faced some hard truths this week as it pertains to foreign policy. A return to the Iran nuclear deal looks to be dead in the water as Iran races towards the capacity to build a nuclear bomb in light of perceived US weakness. The US will now be sending troops back into Afghanistan following an ill-advised move earlier in the year to remove US troops from the country. The country has again become a hotbed for terrorism with the Taliban carry out deadly attacks against US allies left behind. Lastly, US energy self-sufficiency is very much a thing of the past after US oil inventories got so low that President Biden had to ask OPEC+ to increase supply. US inventories are low due to increase in demand, but mainly due to government policy banning new investment in oil & gas and pipelines.

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Share markets retrace falls on virus concerns to finish higher

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Local and global equity markets had a topsy-turvy week initially falling sharply on virus concerns before retracing those losses to finish the week higher as bad news became good news for markets on the expectation of more government and central bank support.

In local stock news, Rio Tinto reported lower than expected iron ore production and shipments for its 2^nd quarter. Heavy rain in WA’s Pilbara region, and coronavirus measures, limited efforts. BHP also reported a dip in quarterly iron ore production.

News broke that oil and gas player Santos is pursuing an unsolicited takeover bid for rival player Oil Search.

JB Hi-Fi shares rose strongly, no doubt supported by lockdown, after the company reported preliminary full year results showing sales up 12.6% and a soaring net profit.

Lendlease continued to streamline their business selling its service business to Service Stream for $310 million. The property group has recently sold its engineering business and US telecommunications and energy operations.

OPEC and its allies struck a deal to inject more oil into the recovering global economy, overcoming an internal split, which resulted in a strong fall in the oil price. The oil price recovered some of the fall after data showed lower than expected US inventories.

The Aussie dollar fell further earlier in the week on increasing virus concerns before mounting a small recovery before the week was out.

The evolving restrictions in NSW and VIC will lead to sizable contraction in economic growth in the 3^rdquarter considering both states combined account for more than 50% of Australia’s economic output. Whilst the government’s fiscal taps have been turned back on, plenty more handouts will be required.

Commonwealth Bank lending data shows a slowdown in the pace of growth in new home lending. However, lending to investors continues to accelerate as lending to first home buyers slows. The average loan size remained elevated whilst the share of fixed rate lending is relatively high.

The preliminary estimate showed Australian retail trade fell by 1.8% in June coming in well below estimates, with the fall heavily affected by lockdowns in several states. Retail spending in July will be substantially weaker.

The Australian national goods trade surplus hit a new peak due to demand for iron ore, with increase in exports for metals, coal, non-monetary gold and gas pushing the surplus to $13.3 billion for June.

Data from the US Commerce Department showed retail sales rebounded 0.6% last month as spending shifted back to services as states are reopening at a faster pace.

The European central bank left interest rates and its program of asset purchases unchanged, as expected, while tweaking its forward guidance on policy to move it in line with its newly adopted inflation target where they’d like to see inflation consistently at 2% before moving on interest rates.

Banks in China kept the benchmark loan rate steady indicating that the central bank is continuing to keep policy stable despite the recent move to add liquidity to the financial system.

On the virus/vaccine front, increased and longer restrictions look likely for NSW and other parts of Australia as case numbers rise and the vaccine drive continues, whilst ICU admissions and deaths remain low. Case numbers in the UK, USA, France and Israel continue to rise, particularly troubling authorities in the UK and Israel where the number of deaths are also rising with already high vaccination rates. In contrast, cases in the USA are rising without the same corresponding increase in deaths. There was an uptick in civil unrest across a range of countries and cities, protesting against lockdowns and vaccine passports.

China has pushed back against a World Health Organisation call for another probe into the coronavirus’s origins that includes examining whether it leaked from a lab, saying there’s no evidence for the theory……hardly surprising.

The Trump administration’s US-China trade deal looks to be under review by the Biden administration after the US Treasury Secretary said the deal failed to address the fundamental problems they have with China.

Taiwan will set up its first office in Europe using the name “Taiwan” (who would’ve thought), a decision the US hailed as a way for the island democracy to strengthen its global presence in the face of pressure from China. Lithuania offered to host the office putting themselves in the firing line of the Chinese given their “One China” principle.

Days after the European Union announced ambitious plans to tackle climate change, the French broke ranks lobbying to water them down as President Macron can’t afford to rile voters ahead of the French elections next year. He’s already under tremendous pressure following recent poor showing in regional elections and recent imposition of the very unpopular vaccine passport.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

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Markets still fretting over rising virus cases

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Equity markets were mixed this week with developed markets flat to slightly lower on virus concerns whilst emerging markets moved higher assisted by Chinese policy support.

A big jump in quarterly earnings is expected to mark a peak for US profit growth in the recovery from last year’s earnings collapse. Upcoming quarterly results will be key, with analysts now expecting 66% of companies to beat guidance.

In local stock news, Sydney Airport’s board has rejected the $8.25 per share bid from a consortium of super funds citing that the offer undervalues the business, whilst Spark Infrastructure declined an offer for all its securities from a consortium of pension funds offering $2.80 per security. Pension funds cashed up, with cash burning a hole in their pockets.

Wesfarmers made a $687 million bid for Australian Pharmaceutical Industries, the distributor of medicines and healthcare products and the owner of Priceline pharmacies, which will form the basis of a new healthcare division.

Shareholders of waste management provider Bingo Industries voted for a Macquarie takeover, whilst Seven Group continues buying shares in takeover target Boral heading towards the 50% mark.

Buy-now-pay-later stocks fell sharply during the week after a report indicated that Apple plans to allow users to repay Apply Pay purchases in instalments.

Oil prices fell this week on concerns regarding rising virus cases globally, which also resulted in defensive assets like gold and government bonds performing well.

HSBC’s chief economist for Australia and NZ said with NSW accounting for 32% of the nation’s total economic output, an extended lockdown was likely to take a significant economic toll on Australia’s recovery from the virus. NSW Treasury estimates that each week of lockdown takes $850 million off activity.

Australian employment rose by 29,100 in June following a 115,200 increase in May, with the unemployment rate moving down to 4.9%, its lowest level in a decade. However, recent lockdown measures will hurt those numbers in the period ahead.

New Zealand’s central bank surprised most investors with a plan to scrap its bond buying program (money printing) from next week. The result will likely be a soaring NZ dollar. Not good for an export-led economy.

US central bank chair Jerome Powell said it was still too soon to scale back the bank’s aggressive support for the US economy while acknowledging that inflation has risen faster than expected but portrayed a recent jump in inflation as temporary and focused on the need for continued job growth.

Data indicated that US consumer prices rose by the most in 13 years last month, while core consumer prices surged 4.5% on the same time last year, the largest rise since November 1991. The bond market noticed briefly, before turning attention to rising virus cases.

European central bank president Christine Lagarde has signalled that new guidance on monetary stimulus will be provided shortly and that fresh measures might be brought in next year to support the Euro-area economy after the current emergency bond program ends.

China’s central bank cut the amount of cash most banks must hold in reserve in order to boost lending in the economy as growth starts to wane.

China’s exports unexpectedly surged in June, helping to underpin the economy amid signs the recovery is starting to slow.

In a sign that US-China relations won’t be fixed any time soon, the Biden administration will add more Chinese entities to its economic blacklist over alleged human rights abuses whilst the US Senate passed a bill that would ban all goods from China’s Xinjiang region unless importers can prove they weren’t made with forced labour. US relations with Iran don’t look any better with the likely realisation that the 2015 Iranian nuclear accord may be beyond saving, with no progress after multiple rounds of talks.

On the virus front, the pace of reopening remains very mixed around the world whilst virus cases are rising in many countries. Most US states continue to reopen whilst California has just introduced some restrictions. The UK is proceeding with full reopening whilst cases continue to rise amongst a population with high vaccination rates. The rest of Europe remains mixed, particularly between the north and south, whilst cases continue to rise in South-East Asia. Closer to home, all states have seen varying degrees of increases to restrictions, with NSW’s lockdown extension and VIC entering a “snap” 5-day lockdown.

In a sign that the people have had enough, we saw uprisings and street protests all around the world this week. Cubans have had enough of communism, South Africans weren’t happy with the jailing of former leader Zuma, whilst we saw protests in France, Greece, and here in Melbourne against government-imposed lockdowns and vaccine passports.

Finance ministers from the US and Europe expressed confidence that a global tax deal endorsed by the Group of 20 has enough momentum to overcome domestic political obstacles in time for it to be finalised in October.

Democrats on the US senate budget committee agreed to set a US$3.5 trillion spending level for a bill to carry most of President Biden’s economic agenda into law without Republican support. The bill would require the support of all 50 Democrats. This is in addition to the US$579 billion bipartisan infrastructure plan.

Need advice? Contact Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide on (02) 9683 2869. www.macarthurwealth.com.au

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Equity markets fall on virus variant concerns

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

Equity markets locally and globally fell this week on concerns regarding rising virus cases.

In local stock news, Sydney Airport’s shares rose strongly after they received a $22.3 billion takeover offer equating to $8.25 per share from a consortium of infrastructure investors mostly made up of Australian industry super funds. The offer will be hard for the company’s board to rebuff, but markets aren’t so sure given the stock price remains well south of the offer price.

Tabcorp will spin-off its lotteries and Keno arm as a separate ASX listed business but has chosen not to sell its wagering and media arm despite several suitors offering to pay about $3.5 billion.

Seven Group has continued to lift their stake in Boral buying 60 million shares at $7.40 each with the company now owning almost 41% of Boral.

The upward trend in oil prices reversed course this week on expectations that some countries may break ranks from OPEC+ production targets. The moves come after the United Arab Emirates blocked an OPEC+ deal that cartel leaders Russia and Saudi Arabia had hashed out to increase output. The Saudis and Emiratis have historically had each other’s backs. Demand is likely to remain high as the global recovery continues, whilst US supply runs low due to President Biden’s green policy.

The Aussie dollar fell into the 74c range against the US dollar as investors sought out safe-haven currencies in light of rising Covid cases and weaker Chinese inflation data.

The Reserve Bank of Australia held the cash rate at the record low of 0.1% as expected at their July meeting. The board also made 2 other policy announcements relating to their bond yield targeting program (ie. keeping government bond yields very low) and their bond buying program (ie. money printing) which will see them taper bond purchases from $5 to $4 billion per week until at least mid-November. They also changed their language slightly to indicate they don’t expect to lift rates until 2024 (previously “2024 at the earliest”).

New lending for Australian housing rose by 4.9% in May with a particularly large lift in investor lending in the month which was up 13%. Owner-occupier lending rose by 1.9% whilst lending to first home buyers continues to flatten out. New lending was strongest in NSW and VIC.

New personal lending rose by a very strong 11% in May, which continues the recent trend higher. Commonwealth Bank’s internal data shows lending for cars and household goods are trending higher whilst lending for holidays remains very soft.

The number of Australian residential building approvals posted a large 7.1% fall in May, likely impacted by the ending of the government’s Homebuilder grant scheme. VIC and TAS actually posted increases. Approvals for renovations remain elevated, whilst non-residential building approvals have lifted in recent months.

Australian retail trade rose by 0.4% in May, which was an upgrade on the preliminary estimate. Retail trade continues to run at an elevated level with all major categories running above pre-Covid levels. Spending on food and eating out drove the increase in May.

The US Labor Department’s employment report showed non-farm payrolls increased by 850,000 jobs last month, but the total remains 6.8 million below its peak in February 2020, as the federal government’s over-generous and over-extended Covid unemployment program pays people to stay home until September causing massive labour shortages. The better than expected monthly number comes as some Republican states have started to remove/decline the federal unemployment programs ahead of time thus forcing people back to work.

European central bank policy makers have revamped their inflation target for the 1^st time in almost 2 decades giving itself more room to keep monetary policy loose. The move gives the bank room to overshoot the target if needed, which means they can ply even more stimulus for much longer.

A deal on an international corporate tax system of sorts came a step closer as 130 countries and jurisdictions backed a plan that includes a minimum corporate rate and tax-sharing on multinational firms’ profits. However, 3 European Union countries have resisted the plan given they currently have corporate tax rates less than the minimum being proposed.

On the virus and vaccine front, the NSW lockdown was extended by a week impacting children’s first week back at school. The low percentage of people vaccinated seems to be the main focus of those in charge given their ill-guided elimination strategy, in contrast to the more critical areas of ICU bed availability (plenty) and deaths (very low relative to a normal winter flu season). In other parts of the world, concerns continued regarding the Delta variant, which data shows is more contagious, is significantly less deadly than the original strain, and vaccines are more than effective. The US continues to reopen, the UK is nearing the date when all restrictions will be removed, whilst Japan declared another state of emergency as it tries to ready itself for the Olympics.

Chinese authorities are planning rules changes which would allow them to block companies from listing overseas, closing a two decade loophole which has allowed Chinese tech giants to attract foreign capital. The move continues Beijing’s tightening of controls over the country’s largest tech companies.

Former US President Trump announced that he will sue Twitter, Facebook, and Alphabet as well as their CEOs in a class action lawsuit for blocking him out of their social media platforms. Trump is banned from Twitter for life and Facebook for at least 2 years, pending another review. The case will likely be decided by the US Supreme Court with both sides effectively using the same argument that it’s their 1^st amendment right to not be censored (in Trump’s case) and to censor (in the social media company’s case given they’re private companies).

Need help? Contact us Macarthur Wealth Management for expert financial advice in Parramatta and Sydney wide. (02) 9683 2869. https://www.macarthurwealth.com.au

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