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Welcome to Firstlinks Edition 339

  •   8 January 2020
  • 3

In this new decade, Australia is expected to add another four million to its population, as it did in the previous decade. We have the fastest-growing population in the developed world (1.5% in the year to June 2019), which is one reason for nearly 30 years of economic growth. More people means more stuff. It's driven by net overseas migration of about 250,000 a year, and when most live in Sydney and Melbourne, the prosperity comes at a cost in transport, crowding and property prices. Natural increases are 0.5% of the population.

Source: Australian Bureau of Statistics, June 2019

An even bigger impact this decade will come from the ageing Baby Boomers, the youngest of which is already 55 (and the oldest is 73!). By 2030, most Boomers will have transitioned into retirement. Not only will this cause a major workforce (and tax payment) exodus, it signals greater drawdowns on pensions and health, and will put further pressure on policy change. For example, while the Labor franking policy is buried for now, the ATO recently advised that over one-third of company tax is returned to shareholders as franking credits.

This week's new articles start with a food theme, fitting after the long festive season. For investors looking for a more familiar way to think about an investment portfolio, we compare it to choosing foods in a diet. Christine Benz continues the idea with an 'investment pyramid', defining where you should spend most of your time and energy for the best results.

Amid these terrible fires comes a warning for all from Chloe Lucas, Christine Eriksen and David Bowman on the consequences of underinsuring our homes. They quote a common mistake in how we guess the insurance amount we need:

"I think we had about $550,000 on the house and the contents was maybe $120,000. You think sure, yeah, I can rebuild my life with that much money. But nowhere near. Not even close. We wound up with a $700,000 mortgage at the end of rebuilding."

Then Hugh Dive looks back over the last decade of ASX company performance and identifies the factors driving winners and losers.

We continue the raging debate about fees paid to advisers on new listed investment funds and the implications for investors, while Paul Heath argues the incentive fees are incompatible with impartial advice.

And finally, a reminder to check our free ebook based on wide-ranging interviews conducted with many leading global and local investment experts.  


Graham Hand, Managing Editor

For a PDF version of this week’s newsletter articles, click here.


David van Schaardenburg
January 14, 2020

Need to be a bit more careful about your statistics – presuming New Zealand is in fact part of the developed world – NZ’s population growth rate in the year to June 2019 was 1.7%... a bit higher than Australia…with all the resultant similar positive and negative impacts with most staying In Auckland.

January 12, 2020

Fast growing population but:
1. insufficient water to sustain it. Oh yes we can build 20 x desalination plants around the country.......the stupidity which passes for planning as big business gets its wish for a bigger market!
2. worsening climate change and more greenhouse gasses, so worsening fire seasons and other catastrophes to come moving forward.
3. cost of upgrading and replacing infrastructure. Where do you ever see this well published by the right wing Press doing the bidding of its big business contributors.
4. a multicultural society which may have worked in the past but which will result in a civil war. 
The planet does not need and cannot sustain the population we already have. Why more? To satisfy greedy big business wanting more customers? Is that any valid reason the destroy what we all hold precious? Apparently so.

Jim N
January 09, 2020

One of the great things that FirstLinks does is to educate and inform people.

However I wish to highlight some unfortunate choice of language which has the potential to misinform and it is something that arose in several of my discussions/debates on the franking credit issue last year.

‘An even bigger impact this decade will come from the ageing Baby Boomers, the youngest of which is already 55 (and the oldest is 73!). By 2030, most Boomers will have transitioned into retirement. Not only will this cause a major workforce (and tax payment) exodus, it signals greater drawdowns on pensions and health, and will put further pressure on policy change. For example, while the Labor franking policy is buried for now, the ATO recently advised that over one-third of company tax is returned to shareholders as franking credits.’

But ALL company tax was collected from ASX companies. There was no leakage back to some shareholders. This is a very important point.

All taxpayers are required to pay tax in accordance with their individual income circumstances. Taxpayers include those who are still in the workforce and many who are not.

Some taxpayers (retired or otherwise) own shares in public companies and qualify for franking credits to avoid paying tax twice on the same profit/earnings. This was bipartisan policy – probably because it was fair.

By presenting this statistic in a piece on retirees a reader might also form the view that retirees are the sole beneficiaries of franking credits which we both know is not the case.

Perhaps a more accurate final sentence of your paragraph might have been:

The ATO has recently advised that the aggregate value of franking credits available to taxpayers (retired or otherwise) is equivalent to around 30% of the aggregate annual amount of company tax.

The broad thrust of your piece inter alia is the need for reform in the area of retirement incomes policy. Agree 100%.

I think we should revisit the mistaken policy change of 2007 which relieved retirees of paying income tax on pension income. We heard no complaint at the time from those on defined pensions (many in excess of $100K) who suddenly had a tax windfall which had not been planned or anticipated.

While reversing this will take some political courage, it seems fairer that those retirees earning pensions of (say) $75 K or more pa (however sourced) should be obliged to pay a special (low-say 5%) rate of income tax on each dollar earned in excess of this amount.

Modelling would determine the appropriate threshold and tax rate. There might be some grumbling but at least these people have the capacity to pay and it is not the 30% slug on a much smaller and often lesser paid retiree population that was taken to the election by the ALP.

Keep up the good work,


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