The politics of franking
Australia is probably the only country where the outcome of a national election can be influenced by superannuation policies. That's the way 2019 is shaping up. The Turnbull Government may guarantee not to change super rules or tax rates for another term, and it will use alarming examples to highlight weaknesses in the Labor policy on franking credits.
Such as the significant advantage of accessing just $1 of the age pension (aside from a range of concessions). A home-owning couple can hold up to $837,000 in other assets before losing the pension. Assume it's invested in fully franked shares earning 5%, giving dividends of $41,850 and franking credits of $17,900. If they then exceed the pension threshold, they lose the $17,900 refund. Here come the holidays and home extensions to keep their assets down.
Our recent articles on Labor's policy have received hundreds of comments and remain open on our website for more feedback.
The politics of property and our amazing population growth
Australia prides itself on its 27 years without a recession, and population growth and immigration are major factors. In only 10 years, the population has risen almost four million, with over 50% living in Melbourne and Sydney. No wonder the roads are clogged. Net immigration has reached about 250,000 a year, with a 10-year population growth rate of 1.7% compared with all developed economies of only 0.3%.
Source: Australian Financial Review, 29 March 2018
This is a primary factor driving property prices, and as John Daley, Brendan Coates and Trent Wiltshire explain, it is the political factors such as migration, tax policy and planning rules which determine the destiny of residential property prices (although Sydney is now falling after its stellar five-year run).
Our archaic application processes, and Round 2
Rarely does a day go by without a breathless media announcement on a new fintech startup, a blockchain innovation or another technical miracle that will disrupt investing. Chris Cuffe's frustration is that the wealth industry has failed to fix that most basic of documents, the application form, and Chris calls on the industry to address this inefficient shortcoming.
And on the subject of fixing things, here are the businesses called before the Royal Commission for the Round 2 hearings on financial advice. Prepare for more bad news.
Investment opportunities
Tim Carleton gives a timely warning that while markets respond to emotion, earnings will ultimately drive share prices. Significant recent movements in bond and hybrid prices are opening opportunities, and Christopher Joye sees value at these levels, while Don Stammer shows why economic cycles will always be with us and what to expect now.
A couple of articles on Listed Investment Companies (LICs) as Peter Rae reports on dividends paid by the leading names, and Howard Badger shows why the new Labor Party policy on franking will have unfair consequences on LIC structures.
This week's White Paper from Insight Investments is their 2018 Responsible Investment Report. ESG principles have moved well beyond the 'nice to have' in investing.
Two other reports below are BetaShares latest ETF Report and the full LIC update from IIR.
Finally, the Commonwealth Games is underway, with Prince Charles and Camilla visiting Sir Michael Hintze at his property near Wagga Wagga before their official duties. We interviewed Sir Michael exclusively a couple of weeks ago. Friends in high places.
Graham Hand, Managing Editor
Edition 247 | 6 Apr 2018 | Editorial | Newsletter