Welcome to Michael’s Musings Facebook page feed. Here, you’ll find all our latest posts, thoughts, and updates on financial planning, current trends, and practical advice.
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Michael's Musings
Musings on money and finance, from a Financial Planner based in East Perth, Western Australia. Nothing on this Facebook account is to be considered personal financial advice.
📊 RBA Keeps Cash Rate at 4.35%: What This Means for YouToday, the Reserve Bank of Australia decided to leave the cash rate unchanged at 4.35%. This comes as inflation, while easing from its peak in 2022, remains stubbornly high at 3.9% (trimmed mean), with no signs of returning to the 2–3% target range until at least 2026.So what does this mean for everyday Australians?🔹 Persistent Inflation: Despite higher interest rates cooling the economy, inflation is proving difficult to fully control. The RBA’s decision signals that we may be in for more uncertainty before we see a real decrease in the cost of living.🔹 Household Budgets Under Pressure: With wage growth slowing and real disposable incomes still lower, many households will continue to feel the pinch. For those with variable-rate loans, now is a good time to review your budget and factor in higher repayments if interest rates rise further.🔹 A Slow Economic Recovery: The economy is growing slower than expected. If you’re in discretionary retail or hospitality, you may already be seeing this in slower sales. However, the labour market remains tight, with unemployment steady at 4.2%.🔹 International Factors: The RBA is keeping a close eye on international developments, especially in China and other key markets. This could impact the Australian dollar and commodities, which in turn, affect our economy.🛠️ What You Can Do:Homeowners: Consider asking for a review of your loan interest rates or consolidating debt to manage future uncertainty.Investors: Be cautious, especially if you’re looking at sectors highly affected by inflation or slow consumer demand.Savers: You might benefit from higher deposit rates, so shop around for the best interest rates on savings accounts.As always, it’s important to stay informed and adapt your financial strategy in response to these ongoing changes. I’ll keep you posted on further updates from the RBA and how these might affect you and your family.Feel free to comment below if you have any questions about how this impacts your finances!#RBA #InterestRates #Inflation #FinancialPlanning #BudgetTips #MichaelsMusings
Statement by the Reserve Bank Board: Monetary Policy Decision | Media Releases
At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent.
Investing for the Long Term: Insights and Considerations 🌱📈Vanguard’s latest newsletter article provides a valuable reminder about the importance of thinking long-term when it comes to investing, especially for those of us with superannuation. www.vanguard.com.au/personal/learn/smart-investing/retirement/rear-vision-roadmap-to-greater-reti…The 30-year returns from various asset classes, such as Australian and international shares, property, and bonds, have shown significant growth over time. This highlights the power of diversification and staying the course through market ups and downs.However, while the long-term outlook is optimistic, it’s crucial to also consider some important nuances:Timeframes Matter: The Vanguard article showcases 30-year returns, but we shouldn’t forget that investing outcomes can be vastly different in the medium term. For instance, U.S. shares, despite their stellar long-term performance, experienced over a decade of negative returns at one point. Most investors might struggle to endure such prolonged periods of underperformance without reassessing their strategies.Market Concentration and Valuation Risks: The U.S. share market has become a significant portion of global indices, which might seem like a great bet given recent performance. But this also means a higher concentration of risk. Right now, many analysts argue that U.S. shares are highly valued—some say overvalued—relative to historical standards. The dominance of just a few "Magnificent 7" tech stocks (Apple, Amazon, Google, Meta, Microsoft, Nvidia, and Tesla) means a large chunk of both U.S. and global indices is tied to these companies. This concentration could lead to amplified risks if these stocks face a downturn, much like what happened during the DotCom bubble of 2000.The Value of Diversification: As Vanguard rightly points out, diversification is key to managing risk. But it’s not just about spreading investments across different asset classes; it also means being mindful of where and how much exposure we have to specific markets or sectors. Given the potential overvaluation in some markets, diversifying across regions and asset types is more important than ever.In summary, while Vanguard’s analysis provides a helpful "rear-vision roadmap" to investing, it’s essential to balance this with an understanding of current market conditions and potential risks. Keep a diversified portfolio, stick to your plan, but also be ready to adapt as market conditions change.Always remember: investing is a marathon, not a sprint. 🏃♂️💼ps.. for those interested in a bit more depth on the "Magnificent 7", here’s a link to a Russell Investments note..russellinvestments.com/au/blog/market-concentration-magnificent-seven
Market Concentration And The Magnificent Seven: Where Next? | Russell Investments
Our senior equity manager research analyst assesses the recent performance of the Magnificent Seven stocks and explains the value of a skilled active manager during today’s highly concentrated marke…
What’s more important – a RBA interest rate decision or large falls in global share markets? That’s the question I asked myself today, given limited time and a raft of possible talking points.I’ll settle for the RBA interest rate decision.www.rba.gov.au/media-releases/2024/mr-24-15.htmlAs expected, the decision was to do nothing. And that makes some sense. That’s actually a rather brave stance. Here’s why..Some folk are pointedly suggesting Australia’s rates are continually below what is academically appropriate for a strong labor market, continued economic growth and hints of persistent inflation. These folk are agitating for the RBA to increase interest rates.Others who point to difficult or ‘messy’ trading conditions for businesses, global uncertainty, reduced household savings and potential falls in Chinese demand for our major commodities as well as a raft of sector-specific issues that are far from being resolves (construction industry insolvencies being a part of that cohort). These folk would like to see a reduction in interest rates, to stimulate the economy and providing a bit of relief for those struggling under increased borrowing rates.Meanwhile, the median Australian is having a rather hard time of things. This inflation persistency thing doesn’t appear all that big a deal to those whose super or homes benefit or to those whose salary certainty allows their income to keep pace with these costs. But it sure hurts for those whose incomes are fixed at anything lower than this persistent increase in costs.The RBA’s ‘middle ground’ of keeping rates as they are, is a bit of a hope and a guess. As the RBA says in its statement, "In year-ended terms, underlying inflation has now been above the midpoint of the target for 11 consecutive quarters. And quarterly underlying CPI inflation has fallen very little over the past year." That’s not a good look. Inflation this far above target is also impacting heavily on those with fixed incomes or those with mortgages or debt. And it accumulates.The RBA is aiming at a midpoint of 2.5% inflation. Results have been nowhere near this target. And expectations are that they won’t be until 2026. There is an awful lot of cost and price hurt sitting between now and then.To make it even clearer – here’s the RBA’s own table (messily presented but you can visit the RBA page and see the pretty one). Look for a figure near 2.5%..Monthly CPI IndicatorNot seasonally adjustedDate Year-ended growth(per cent)2022January 4.0February 4.9March 5.7April 5.5May 6.1June 6.8July 7.2August 7.2September 7.2October 7.0November 7.4December 8.42023January 7.5February 6.8March 6.3April 6.7May 5.5June 5.4July 4.9August 5.2September 5.6October 4.9November 4.3December 3.42024January 3.4February 3.4March 3.5April 3.6May 4.0June 3.8Source: ABSBy the time inflation is ‘back in its box’ and near the RBA’s 2.5%ish target, the average person will be paying an awful lot more for their goods and services than they would have if inflation was nearer that elusive target.How will the median Australian catch up that lost purchasing power? Now there’s a good question for your local political representative…And for those who’ve made it this far… i had a bit of fun, and asked Claude.ai to rewrite this post and make it more media friendly. The clever ai mused on my words for a fraction of a second and came up with the following text, which I’m sharing because this is where the future is, I am told…📊 RBA Interest Rates vs Global Market Falls: Which Matters More?Today, the Reserve Bank of Australia (RBA) decided to keep interest rates steady at 4.35%. But what does this mean for Australians?🏦 The RBA’s Balancing ActThe RBA’s decision to maintain current rates is bolder than it might seem. Here’s why:Some experts argue Australia’s rates are too low, given our strong job market, economic growth, and persistent inflation. They’re pushing for rate hikes.Others point to struggling businesses, global uncertainty, dwindling household savings, and potential drops in Chinese demand for our exports. This camp wants rate cuts to stimulate the economy.Meanwhile, the average Australian is feeling the squeeze.💸 The Inflation ChallengeInflation has been above the RBA’s target midpoint (2.5%) for 11 straight quarters. The RBA doesn’t expect it to hit the target until 2026. That’s a lot of financial pain between now and then.Let’s look at the numbers:[Insert simplified graph of inflation trends here] (Michael note : it seems all I have to do is insert the RBA’s pretty table)..🏠 Impact on AustraliansThis persistent inflation might not hurt those with substantial assets or rising incomes. But for many, especially those on fixed incomes or with mortgages, it’s a different story. Every price increase chips away at purchasing power.❓ The Big QuestionBy the time inflation returns to the RBA’s target, Australians will be paying significantly more for goods and services. So here’s the million-dollar question: How will the average Australian recover that lost purchasing power?It’s a question worth asking your local political representative.What are your thoughts on the RBA’s decision? How is inflation affecting your financial planning? Share in the comments below!#RBA #AusEconomy #Inflation #FinancialPlanning #PerthFinance
Statement by the Reserve Bank Board: Monetary Policy Decision | Media Releases
At its meeting today, the Board decided to leave the cash rate target unchanged at 4.35 per cent and the interest rate paid on Exchange Settlement balances unchanged at 4.25 per cent.
📊 Inflation Alert for Retirees: Is CPI Hiding the True Cost of Retirement?🔍 New insights reveal that the Consumer Price Index (CPI) might not be telling the whole story when it comes to retirees’ cost of living. Here’s what you need to know:1️⃣ CPI doesn’t account for retiree-specific expenses2️⃣ Living Cost Indices (LCIs) offer a more accurate picture3️⃣ Self-funded retirees and age pensioners face different challenges🏠 Did you know? 14% of homeowners aged 65+ still have a mortgage, exposing them to interest rate shocks.💼 Insurance premiums and rent are hitting retirees harder than CPI suggests.🤔 What does this mean for your retirement planning?Read our latest blog post to learn how to protect your retirement from hidden inflation: www.michaelsmusings.com.au #retirementplanning #inflation #financialliteracy #australianretirees
Financial Planning tips from a Perth Financial Planner
Are Australian interest rates "high"?Depends on your perspective. Most of the authorities I encounter are of the opinion that it’s only a matter of time before interest rates fall. Again, most authorities suggest this fall will be a logical outcome of high Developed Nation debt levels for both households and governments. The argument is that developed nation economies cannot tolerate higher interest rates without triggering recessions which would lead to central banks logically lowering official cash rates to try and stimulate faltering economies.But interest rates have already lifted further and stayed higher for longer than most forecasters expected would be possible. And there are arguments to be made that the ‘neutral rate’ for Australia has still not been reached. If this is true then interest rates should be higher still. At least in the short term.This post isn’t about making any predictions for interest rates. It’s simply to present a picture. How do current interest rates look when considered in the very long term? My post picture is Australia’s 10 year bond yield over the past 50 years. That seems reasonably long-term to me. Putting aside all the arguments that this or that cannot happen in the world of interest rates, how do you view current interest rates? Are they low or high or just right?