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Hello, I Peter Switzer and welcome touch
to the program which are due in business.
touch with the best minds in the Markets
business. On tonight show, CMC can
Markets Michael McCarthy, and how index?
can a rise in PHP did not help the will
index? There is a view that says it Roger
will make housing less affordable. that.
Roger Montgomery says his view on Ted
that. And the self managed it on you
Ted Gemma Dale on how much super Jeff
you need to retire. And Jeff -- that
Jeff Oughton. We will bring you all valuable
that corporate analysis and some success
valuable lessons from Australian questions,
success stories. If you have any twitter.
questions, email me or follow me on better-than-expected
twitter. It is a big day with a reportedly
better-than-expected company heading
reportedly with share prices was
heading at North. So how come it Firstly,
was a disappointing outcome? headline.
Firstly, we tend to focus on stocks
headline. But there are a few extra bit
stocks it. That does cover a fair others.
bit of it, but there are plenty of because
others. The thing about it is prices
because of the big slide in share prices on the resources sector, they
because of the commodity prices, the
they are a less significant part of They
the index than they used to be. Although
They do not have as big an impact. they
Although they did hold up well and of
they have done for the last couple well
of days, and they have been treated well in London and the US, because listed
they are big mining companies 3%
listed around the world.They are tough
3% on the, aren't They?It was billion
tough conditions.Last year, 4.4 806
billion $4.4 billion profit down to why
806 million. Explain to my viewers well
why that is not bad.There is a These
well explored commodity cycle. business
These people have been in the are
business for decades and no there them
are ups and downs. They prepare for perfect.
them pretty well. They are not terrible
perfect. We note the in 2007 made a But
terrible mistake, it does happen. this
But because they are experts in often
this area, they get it right more know,
often than they get it wrong. We know, tea prices have come off, so cut
they have stuck to it. They have one
cut their costs.I guess, this is something
one thing. They are looking at commodity
something they can see, the what
commodity price. They have to guess cost
what they are doing in terms of until
cost cutting. They do not do it date
until it comes out.They stay up to they
date in terms of the company.So than
they have impressed the market more and
than what the market was expecting, as
and that is why this result is seen CSO,
as OK.Yes, not just down to the that
CSO, but the management team.OK, expecting
that is Rio. The HP. Are you have
expecting the same kind of.?We is
have seen the production report. It business
is about taking costs out of their
business and how they structured expect
their cells. There are unknowns. I the
expect we will deliver better than investors
the market expects.For the to
investors out there who do not need quarterly
to impress themselves monthly, planning
quarterly or even yearly, I am three
planning my retirement nest egg for by
three to five years. Is Rio eight We
by at these levels?Strategy first. long-term
We want to buy these companies long-term when they are most. When If
the company cycle is near its lows. is
If it is not there already, then it place
is nearly. What they can do is market.
place resting orders under the will
market. Every now and then there people
will be a wobble.There are normal people listening. A resting orders something.
is like a reserve bench or well
something.It is an order to buy Six
well under the current share price. to
Six years ago, it got smacked down China.
to $50 when we had a wobble about via.
China. That's when I want to buy third
via. So I put and with info about a $51.
third of what I want to invest, and buy
$51. So if there is a wobble, I'd miss
buy it at a bargain price.So you which
miss out on those Bryce Gibbs, recommend.
which is a strategy I often put
recommend. So then where would you would
put your vesting order on that?I you
would go in around $22.How low do $24
you think it's with great?I think the
$24 is the answer.Let's look at still
the banks at the moment. Are they people
still aid dipping proposition for next
people who like dividends?Over the few
next few months, yes. In the next raise
few weeks, maybe not. They need to quite
raise capital. We are going to see banks.
quite a few shares issued by the will
banks. This is one of the ways they requirements
will meet the new capital in
requirements that Apra have rushed So
in on. There will be share issues. really
So it is a similar idea. If you options
really need to, you can buy some if
options or sell some C and C. But in
if you are looking at the holdings the
in the bank, same idea.What about use
the use of stocks? DUs -- do you portfolio?
use stops in your own personal make.
portfolio?Almost every choice I where
make. I will have a price in mind I
where I will say this one is wrong. I have been trading 30 years and price
regularly get it wrong. I have a one
price in my mind. ICI have got this because
one wrong. The market tells me that am
because the price has moved down. I to
am out.We are hovering around 32 that
to 31, and a lots of people thought now
that was a good buy. It was 37, but There
now it is has gone down to 28. at
There is nothing wrong with buying got
at 31 if you stay at $29.81, I have the
got it wrong and I will bail out at thing
the next opportunity. The worst Thai
thing you can do in business is south.
Thai capital up in shares going capital
south. It is a big cost to us. That those
capital is valuable. If you put you
those shares in the bottom drawer, disservice.
you are doing your portfolio a real vesting
disservice.So if it goes to 26, a order
vesting order 26, -- a vesting not
order 26, what do I do?If you do there
not do that, you are stuck.Are I'm
there companies out there you like? not
I'm going to be really boring. I do was
not often recommend Telstra, but I wearing
was watching it today.You are Orange,
wearing a nice tie by the way. have
Orange, blue and white.I swear, I company!
have no association with the company! I own the shares, but I performed
have no other association. But it look
performed well today. It held up. I in
look for shares that performed well there
in poor markets. That tells me not
there is demand for them. I might look
not add them to my investments, I Once
look to them for short-term trade. we
Once the fish comes of the market, shares.
we may see a bounce in Telstra what
shares.What about companies like Have
what about companies like CLCSL. companies
Have we missed the boat on these trade,
companies in terms of the dollar lower
trade, or have you factored in a company
lower Aussie dollar and so these I
company still buy at these levels? embarrassed
I do not think so. I got a bit terribly
embarrassed at $66. One I got from
terribly wrong. But it has come potential
from a 110 to a low 70. But the dollar.
potential is for a high Aussie exposure
dollar. I will wait. I have some not
exposure in the sector, but I am long-term
not in a rush to get more. I be them
long-term story, but I cannot buy this
them now.What about ways you think year?
this index is going to use this is
year?Close to six 6000. I think it 5400
is going to fluctuate, we will see possible
5400 again, we will see 6000. It is 6000.
possible we could see 5400 and then rise
6000.You think the interest rate market?
rise in the USA will spike the because
market?The interest rate is rising You
because the economy is improving. cell.
You might see short-term cell. -- abolishing
cell.After the break, how was effect
abolishing news have positive understand.
effect on house policies. I do not the
understand. We will find out after the break.

Welcome back to Switzer on Sky News whingeing
money. There has been a lot of to
whingeing about nuclear in camera investors
to commentators to those jealous of property.
investors who have gone long on

There is an argument it makes investors
housing expensive because greedy owner
investors compete with lovable buyers.
owner occupiers and first-time business
buyers. Associate Professor at the of
business school at the University you
of Sydney, Jamie Alcock, says if be
you take it away, house prices will academic
be less affordable. Only an Thank
academic could come up with this. your
Thank you for joining us. I am on to
your side. I want you to prove it who
to a lot of the cynics out there Negative
who think this is impossible. affordable
Negative gearing makes housing more tax
affordable for investors because of generalisation?
tax deductions. Is that a fair of
generalisation?I am not convinced early
of that. For a short period of time, perhaps
early on in the investment period, initial
perhaps rents are not covering the initial costs so it makes it more further
affordable at that stage, but want
further down the track, investors will
want to generate a profit, they profits,
will be paying taxes on those not
profits, which is a loss. There is for
not necessarily a long-term subsidy misled?
for investors.What if people are the
misled? Investors think it makes be
the whole deal cheaper. That could do
be a part of the argument that they more
do not realise that it makes it it
more expensive, but the reality is easier
it makes them think my payments are refund.
easier to make because I get a tax owners
refund.In every market, home there
owners and occupiers and investors, up
there will always be a section not We
up to date on where they should be. investors.
We would call them irrational irrational,
investors.All Australians are my
irrational, I think! Explained to away
my audience why you think taking houses
away negative gearing will make thing
houses less affordable.The first it
thing to think about is the reason why
it was introduced, the logic and was
why it was introduced originally housing
was to encourage investors into housing and increase the supply of there
housing available for rent. If all
there is greater supply in housing, all other things

Rents come down because of that. side
That is the argument.OK. The flip gearing
side is, if we take negative of
gearing away, you think the supply of houses for renting will shrink. critics
That is the basic argument.Your how
critics are arguing something but how do you reply?When the negative rent
gearing provisions were taken away, But
rent anywhere, according to critics. market.
But housing is an incredibly sticky to
market. It takes years for supply build
to respond. It takes many years to How
build houses to reply to the demand. Around
How long was it taken away for? mention
Around 18 months. Critics failed to prices
mention what happened to house believe
prices in that same time. If you to
believe that is a sufficient sample which
to draw a meaningful conclusion, 20%
which I do not, house prices rose more
20% in that time. Housing became don't
more unaffordable in that period. I but
don't agree that is a good sample, would
but if you believe that...You years.
would like the centres over five longer.
years.Possibly young -- possibly government
longer.What is the likelihood the negative
government will tamper with away
negative gearing? They cannot take interesting
away from shares.What is interesting is a lot of focus is on critics
negative gearing for investors. The say
critics of negative gearing will to
say there is a 5-$6 billion subsidy cannot
to investors and owner occupiers not
cannot attract that. What they do are
not recognise is owner occupiers greatest
are the beneficiaries of the investment
greatest tax subsidy of any capital
investment class in Australia.The pay
capital gains tax free.They do not you
pay tax on imputed rent. Whether occupier,
you are renting or an owner of
occupier, you are the beneficiary get
of the economic bit of shelter. You it
get that tax free.They would call are
it a house tax. You own one and you you
are benefiting from owning it.If same
you treated owner occupiers in the not
same way as investors... you would position.
not want to be a politician in that owner
position. If you were to do that, the
owner occupiers would be playing in tax.
the vicinity of $40 billion more in significantly
tax. The cost of ownership would be would
significantly higher so people be
would be getting out. There would capital.
be better utilisation of that whole
capital. The litmus test of the asked
whole argument is this: if you how
asked opponents of negative gearing being
how you feel about owner occupiers investors,
being treated the same way as that.
investors, then aborted talk about capital
that.Paying chemical -- paying You
capital gains tax on their houses. and
You have also got the other issue, this
and this is what they believe out, replace
this was done for investors to public
replace the housing Commission of governments
public housing, and that cost is
governments as well. If you say it needs
is $5 billion, at least $4 billion housing
needs to be invested to keep you
housing supply up. On that criteria, stupid
you can't see any government being negative
stupid enough to play around with there
negative gearing.Politically, with
there are too many votes to lose very
with this. Economically, there are in
very poor arguments to support it problem
in the first base.There is a economics.
problem in our favourite discipline, part
economics. If you look at just one look
part of the argument... you have to paper
look at the other hand. Is there a this
paper on this or if you just put media.
this out to the media?Just for the ownership.
media. The RBA launch an inquiry to the
ownership. It was the first time You
the RBA had entered that the bed. were
You said they entered it and they It
were wrong -- entered the debate. If
It was significant they entered it. correct
If you have more good reasons to happy
correct stupidities out there, I am Thank
happy to have you on the show. associate
Thank you very much.Jamie Alcock, University.
associate professor at Sydney Montgomery.
University. After the break, Roger

Welcome back. There is a glut of million
controversy about whether $1 comfort.
million is needed to retire in yes
comfort. The number crunchers say Australian
yes you do, while the team of need
Australian supers says you do not of
need that much. Gemma Dale is head You
of the super funds at NAB. She won. What
You have read the debate.I have. entire
What do you think?I think the Aggressive!
entire argument is spurious. want.
Aggressive!It depends on what you in
want. If you want $200,000 a year last
in retirement, $8 million will not last long. If you want 20, it will to
last you for ever. Unless you plan numbers.
to retire at 20. But it is just this
numbers.I guess the theory around what
this is $1 million. If I follow around
what super funds have been doing, $1
around 7%. I have 1 million I have capital.
$1 million, I went to touch my that
capital.A lots of people think ago,
that is good.I then but many years to
ago, it was said that if you want thirds
to retire in comfort, you need two you
thirds of your finished salary. If $66,000
you finish with 100 grand, you want they
$66,000 in retirement. But then they said if you only get 5% return, The
you will definitely need 1 million. do
The Australian supers sate you can that.
do Well, you can do better than Your
that. In Australian super funds. much
Your point is it depends on how depends
much you want in retirement.It in
depends how long you plan to spend has
in retirement. My father is 64, he the
has no intention of retiring for expectancy
the next 10 years. His life same
expectancy in retirement is not the That
same as someone retiring at 58. you
That timeframe is critical. What critical.
you want to do in retirement is what
critical. These assumptions work on does
what the average person spends, retire
does in terms of the times they are
retire and how they will live. You scenario
are not average. Look at your own the
scenario and be agnostic as to what the consensus might be. Workout to
what is right for you.People look head
to experts like you. Your title is say
head of self managed to. So they it
say is me a safe figure. You think and
it is wise to try and get 1 million, happy
and that gives me leeway if I am 50,000.
happy with 70,000 or 80,000 or to
50,000.If you have an aspiration 80,000
to have a retirement around that 70, 8%
80,000 mark and you think seven to in
8% is a reasonable rate of return what
in retirement, and that depends on you
what you are willing to invest in, taking
you have got to be very comfortable So,
taking risks with your portfolio. it
So, they are an annuity space, and So
it is a small return. Four or 5%. need
So you need to have 40 or 50 so you retirement.
need to have 40 or 50,000 in to
retirement.So you won't capital, return.
to get a lower rate of capital in expectation
return.If you have a low with
expectation to enjoy retirement with a fair bit of money, you need think
to dialogue the risk. But do you seven
think they have two down more than two
seven but do you think they have want
two down more than 7-8%? If you that,
want more money, you have to do make
that, but is it an expectation to think
make 7-8% out of super nowadays?I Some
think 7-8% is a good place to start. of
Some longer year returns were 16% portfolio.
of average across all types of market
portfolio. And there was a massive disruption.
market correction. A huge GFC,
disruption.You are talking about change
GFC, of course.That dramatically retirement,
change people circumstances. But in that.
retirement, you can expect some of expectations.
that. Do not have unrealistic for
expectations. 50% will not happen funds,
for you.In self managed super them.
funds, there are people picking on why
them. Why are they doing bad? -- average
why are they doing that?The said
average is different to meeting, it
said the median balance is low, but taking
it is a good number. They are The
taking con sessions of the table. access
The superannuation concessions have of
access to both.They are the type retirement
of people who are having the want.
retirement lifestyle others might Gemma.
want. We are running out of time, can
Gemma. That gives me a hint. What running
can you give as advice to people Superfund?
running their own self managed you
Superfund?If you are comfortable well
you have enough money and it is careful
well managed. People are not But
careful enough about state running. that
But once you have enough capital, at
that is not a problem. We will look carefully
at your estate planning and get it covered
carefully organised. It is not must
covered by your will.And so you strategy
must make sure your investment in
strategy is linked to what you want in your will.Sort your investment coming
strategy first.Thank you for it
coming in. Gemma Dale from NAB. Now business
it is time to get a wrap of today's falling
business news.Good evening, the taken
falling price of commodities has mining
taken its toll on Rio Tinto. The billion,
mining giant said a profit of $6 earlier
billion, compared with $4.8 million earnings
earlier this year. Underlying 55%.
earnings from mining or were down wet
55%. Earnings from copper and cold this
wet down 40% for the first time were
this year, but aluminium earnings its
were up 15%. Rio Tinto has lowered around
its capital expenditure guidance to They
around 5 1/2 billion US dollars. gearing
They have warned that negative the
gearing will not be a fix all for into
the property market. For a enquiry financial
into home ownership, the head of financial stability said negative isolation,
gearing should not be looked in view
isolation, calling for a holistic regulator
view of all tax incentives. The banks
regulator is focused on ensuring heightened
banks lent sensibly in the current Australia's
heightened risk environment. July
Australia's unemployment lead for has
July has come in 16 lead for July expectations
has come in 16.5%, well above of
expectations of 16.1%. The number this
of people with jobs both 38,000 the
this month, which was better than Part-time
the expected rise of 10,000 jobs. The
Part-time jobs were up by 26,100. said
The chief economist at George hands ANZ
said the figures showed improvement. trading
ANZ shares have been placed in a regulatory
trading halt, to meet new Apra.
regulatory demands from prior. -- estimated
Apra. Major banks need to raise an two
estimated $28 billion in the next new
two financial years to meet Apra's new requirements. In the meantime, 4.6%
ANZ lifted their cash profit by around
4.6% to $5.4 billion, that is That
around 7% below annual forecasts. Thanks.
That is the latest in business news. brains
Thanks. It is time to pick the Montgomery
brains of fund manager Roger future
Montgomery in what he thinks the what
future of BHP is. We will find out not
what companies he likes and does Peter.
not like. Hello.Nice to be back, So,
Peter.Nice to see with long hair. on
So, BHP and Rio, you have had views the
on them.The view has always been since
the same. We have never bought it Montgomery
since the inception of the driver
Montgomery fund and the Montgomery couple
driver to fund. We have owned a past,
couple of gold companies in the very
past, and we previously, in the owned
very early part of the fund, we companies.
owned some mining services dance
companies. We made a big song and because
dance about getting out of those because there was a disaster coming. the
We are now seeing that. Because of quite
the slowdown in China, that was there
quite dramatic. What happened is The
there was an oversupply of steel. for
The local government vehicles used return
for infrastructure are getting a infrastructure,
return of about 3% on 7%
infrastructure, but they are paying appetite
7% on their debt. They have no is
appetite to build anything. There residential
is a three-year oversupply of real
residential real estate. Commercial No
real estate prices have fallen 15%. producing
No one wants steel. China is and
producing 80,000,000,000 t of steel, dumped
and consuming 28. So that is being into
dumped on the market. We listened the
into the conference call of one of world,
the largest steel producers in the last
world, and their revenue in the year.
last quarter dropped 18% year on year-on-year.
year. There is -- EBIT has fallen is
year-on-year. So to show you there impacts,
is other stuff going on and other United
impacts, earlier this week in the Called,
United States we had Alistair high
Called, the -- Alpha coal, showed commodity
high leveraged and falling and
commodity costs. Turn to Australia which
and Brazil, and you have groups which have high leveraged, falling free
commodity prices that are needed have
free cash flow. In Brazil, they for
have an extra $3 billion to spend are
for their project expansion. They do
are going to be in dire straits.So the
do these troubles help or hinder Brazil,
the HP? -- BHP.In Australia and Brazil, they are highly geared and had
have negative cash flow. They still incentivised,
had to pay interest. They are produce
incentivised, perversely, to prices
produce more iron or even though unnecessary
prices are going down. Supply is deal
unnecessary because we have this They
deal about -- steel rods from China. it
They will push prices down more and what
it will be a vicious cycle. I hope happen
what we saw with Alpha will not marginal
happen in Australia with out concern.
marginal producers. That is my say
concern. I think BHP and Rio, able fallen
say it looks cheap and it has worse
fallen a lot, but there could be years,
worse to come. Remember that for 40 £40
years, before 2004, it traded at the
£40 a tonne.So, this is obviously Let's
the area we have to keep an eye on. have
Let's run through some stocks. You We
have recommended them. Green Cross? wrong
We loved it at one stage.What went what
wrong with it?The Green Cross, some
what has happened, I think, is that some key people have left the individuals
business. They were talented individual
individuals who founded those cross
individual businesses. The green green
cross that in early business -- the the
green cross veterinary business and running
the pet barn. I wonder if people running those businesses and under
individual stores aren't happy is
under the new regime. What happens whenever
is when any retail venture expands, best
whenever it expands, you take your So
best and most profitable site first. presence,
So when you expand a retail the
presence, you do not worry about low
the marginal ones. You get all the argue
low hanging fruit first. I will Barn,
argue that they overpaid for Head We
Barn, much overpaid. -- pet barn. investment.
We make very good money from that sold
investment. I am happy to say we sold it long before the share price. what
We are now looking at it again and business
what is required to get the bright
business back on track. We want a price.
bright prospects but also a cheap price. It looks like it has a cheap middle
price.VTEC shop.That is in the strategy,
middle of a turnaround now. The new ever
strategy, I do not know if you have They
ever been to one of their shops. Barry
They went a bit of the rails after was
Barry Saunders left. Chris Price you
was a great CEO. To run a retailer, knows
you need a merchant. Someone who I
knows what products people will buy. Lee,
I remember the guy who did Darryl retail,
Lee, Jason Leigh. He said that about
retail, stacked high.It is all want
about being a merchant. I do not Chris
want to say anything negative about CEO.
Chris Price, because he was a great stores
CEO. But when I walked into those selling
stores if you use a go, they were You
selling products at 50, 60, $70. for
You do not go to the reject shop results,
for that. But after the full-year them.
results, we will have a chat about Aussie
them. I am not worried about the Jaidee
Aussie dollar declining further. of
Jaidee hi-fi.They have the benefit $20,000
of the government incentive. The also
$20,000 benefit from that. They no
also benefit from the fact there is Pisces
no deflation in electronics. The But
Pisces Australia creeping back up. consumers
But you wonder how sensitive of
consumers are to the rising prices latest
of TVs. Do they need a TV with the direct
latest technology? They do not buy they
direct from manufacturers, said currency.
they are not taking a hit on the from
currency. It gets passed through less
from the importers, that they are outlook
less prone to that. Can I say the but
outlook looks like it is improving, OK,
but I think it is all in the past. you
OK, so companies in the past that any
you have talked about. Are there positioned
any companies you think are well- now?
positioned for what we see right now?Let's put aside the bleak unemployment
picture for iron ore, with There
unemployment rising and so forth. extraordinarily
There are businesses doing comes
extraordinarily well. The one that sell
comes to mind his challenger. They levels
sell annuities. They have three ageing
levels of growth coming. One is the
ageing baby boomers. What I called got
the demographic avalanche. You have when
got more people in the age bracket that
when they think about it. Within a
that cohort of people, you have got accumulation
a large group switching from Within
accumulation phase 2 pension phase. only
Within the pension phase, you have annuity
only got about 4% market share in David
annuity is. The actual fact is that enquiry,
David Murray, the financial system it
enquiry, suggested that maybe, but we
it hasn't been adopted, but maybe an
we think about mandating the use of portfolios.
an unity is in superannuation 15%.
portfolios. You can go from 4% to the
15%. If analysts look at that for have
the portfolio share, they would not predictions
have that modest straight line would
predictions for earnings. That great
would be exponential. You have think
great living growth within grey. We --
think it could be multiples bigger. within
-- you have great within growth bigger.
within grey. It could be multiples their
bigger.I cannot see people putting unity.
their retirement funds into an they
unity. I could see 10 or 15%, as you
they -- a safe space. What else do used
you like to makemedia monitors. It now.
used to be called. IDS is declared business
now. What is great about this own
business is it is not a bargain. We more.
own it and would love to buy a lot arguably
more. We would argue that it is companies
arguably one of the best quality stock
companies listed on the Australian for
stock market. It has been around company.
for decades. It is new as a listed company. Some have been with them proportion
for 20 years plus. A large been
proportion of their customers have If
been with the more than 11 years. and
If I want to follow Peter Switzer, about
and I want to know who is talking they
about me in the press and the media, Airlines
they give you a sheet to tell you. the
Airlines want to know. But here's Because
the thing, it is all changed. running
Because of social media, if you are one
running an airline in Australia and gear
one of your planes, the landing landed
gear is broken at the front and it don't
landed on the front we all, you films
don't know before the.... Someone firewall.
films that on its phone and it goes all
firewall. You need someone to track So
all the social media mentioning you. they
So their numbers are growing up and they are expanding into Asia.Are their
they easy to copy?No. Because of their reputation and the systems value
they have got in place and the If
value they add for their customers. done
If it was easy, someone would have done it 20 years ago. They have not Montgomery.
done it yet.Thank you, Roger will
Montgomery. After the break, we Australian
will see how financially squeezed Australian families are feeling now.

Welcome back to Switzer. Jeff for
Oughton is the consulting economist --
for MP, formerly known as any bank being
-- 4ME. Australian families are not starting
being as good as the economy is pulse
starting to look. Let's take the Thank
pulse of Australian family finance. going
Thank you for joining us. You are he
going to have to sort this out. And been
he bank is now called Me.It has industry
been rebranded, ME. It is an always
industry and superbank.I have name.
always been caught out as to the Tell
name. We now call it Me.Exactly. months,
Tell us about the survey.Every six It
months, M ME carries out a survey. people
It is very detailed. We asked savings,
people about their spending, anticipated
savings, investments, debt, retirement,
anticipated standards for living in an
retirement, and it is added up into these
an index of financial comfort.Are are
these all your customers?No. They Australian
are a representative sample of The
Australian households.OK, good. to
The time period was the six months Yes,
to the end of June, is that right? financial
Yes, over the first half of this were
financial year.In a nutshell, what headline,
were the main findings?The significantly
headline, the comfort index fell five
significantly by about 6%, to about with
five point 4/10. That is consistent having
with about 37% of Australians was
having low levels of comfort. It 11
was broadly based across the whole key
11 drivers.Give us an idea of the key drivers the index looks at.The key driver in the last six months confidence
was 11% fall in households manage
confidence ability to mine -- manage a financial crisis. There lack
was a significant fall in their household
lack of comfort around their that
household savings. That cash buffer financial
that provides insurance against a to
financial emergency.Have you tried through
to work out why? We are living rates.
through historically low interest people
rates. What is wrong with those concerned
people out there?They are not of
concerned about their debt because they
of those low interest rates. What the
they are concerned about is mainly about
the weak labour market still. Only a
about one third of Australians got year
a pay rise in the last financial He
year and about 25% got a pay cut. growth.
He still had very subdued income income
growth. You still have very subdued find
income growth. It is difficult to job
find a new job if people lose their being
job unexpectedly. Australians are and
being cautious with their spending You
and prudent with their finances. economy
You have looked at the Australian Australian
economy for a long time and prolonged
Australian consumers, is this a fear
prolonged hangover from all of the the
fear and anxiety that came out of of
the global financial crisis?Some because
of it is associated with that their
because people are concerned around standard
their investments and anticipated But
standard of living in retirement. this
But the main driver here is still concerns
this weak labour market and cash
concerns around very low levels of savings
cash savings. You are seeing the bit,
savings ratio on average go down a have
bit, but one third of Australians Their
have less than $1000 in savings. necessity
Their biggest worry is the cost and not
necessity of cash savings. It is fifth
not until you get to the fourth and about
fifth when people get concerned and
about the global financial crisis economist.
and the global economy.You are an wealthy
economist. We have often argued how affect
wealthy you might feel should Superannuation
affect our consumer outlook. doing
Superannuation funds have been or
doing very well for the last four going
or five years. House prices are not
going up. Do you think people are that
not really cognisant or affected by funds
that directly when their super at
funds look healthy?When you look index,
at the household financial comfort comfort.
index, you find a wide range of is
comfort. That self funded retiree the
is the most comfortable of all of 7/10.
the groups, they have an index of Australian
7/10. When you look at the average look
Australian comic is 5.4, and if you government
look at single parents depended on around
government assistance, it is down markets
around 3.5, four. You still housing Sydney,
markets going up in Melbourne and Western
Sydney, but they are falling in numbers
Western Australia. When you look at still
numbers rather than dollars, you Australian
still find a very cautious prudent
Australian household and being sustained
prudent with their finances. Sure, wealth
sustained rises in income and into
wealth will eventually flow through with
into spending, but at the moment nominal
with the price of red gold falling, is
nominal income growth in Australia finished
is in third gear.We know it economic
finished in June. Since then, some like
economic indicators have improved better.
like business conditions looking has
better. Even consumer confidence with
has been up three weeks in a row possible
with the ANZ-Roy Morgan. Is it do
possible this could be turning or decent
do you argue that until we see feel
decent wage rises Australian will families
feel the pinch?Clearly, Australian Those
families are feeling the pinch. the
Those who are feeling it worst at comfort
the moment are renters. Their first
comfort fell by over 12% in the not
first half of the year. They are house
not getting the gains of rising rises.
house prices. They are getting rent going
rises. You need the labour market earnings
going and wage rises. There is no conditions
earnings growth out there. This is we
conditions are improving a bit but cycle
we still haven't got an investment sector
cycle going outside of the mining Thank
sector as it continues to fade. you
Thank you for joining us. Talk to be
you in a quarter's time.It would show
be good too, cheers.That is the joining
show for this week. Thank you for best
joining us. Over the weekend, the Live
best of Switzer. See you next week.
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