Cryptocurrency: Part 1

What is it & how does it work?

Crypto is a term that many of us have heard in recent years, and put simply, it's a relatively new form of investment. We've taken the time to delve into research on this interesting investment technology, so that you can wrap your head around what it is all about, and perhaps make an informed decision about whether or not it is something you'd like to invest in. In this article, part 1 of this series, we are going to map out what cryptocurrencies are and how they work. In part 2, we'll be diving into what the best cryptocurrencies are, and how you can go about buying cryptocurrencies.

What is cryptocurrency?

Cryptocurrency is a form of payment that can be exchanged online for goods and services. Many companies have issued their own currencies, most often called tokens, and these can be traded specifically for the goods or services that the company provides. Some people think of tokens as you would casino chips - you need to exchange real currency for the cryptocurrency to access the good or service. The supply and value of cryptocurrencies are controlled by the activities of their users and highly complex protocols built into their governing codes, not the decisions of central banks or other regulatory authorities.

How does cryptocurrency work?

Cryptocurrency, at its base level, is a digital currency that uses cryptograph (a set of mathematical codes that only the buyer and seller can read) to protect transactions. Cryptocurrencies and their cryptographies are built on a foundation using blockchaintechnology. Blockchain is a decentralized technology spread across many computers that manages and records transactions. Blockchain technology stores information about previous transactions and expands over a peer-to-peer network of computers. Part of the appeal of this technology is its security. 

When did cryptocurrency come about?

Cryptocurrency's technical foundations date back to the early 1980s. If you’re interested in it's foundations, you can read more about the technical history of cryptocurrency here.

Bitcoin, currently the most popular digital currency, was created in 2009 and is widely regarded as the first modern cryptocurrency. Its slow increase in price went mostly unnoticed until 2016. During this year, Bitcoin and other cryptocurrency investors predicted a major spike in price in 2017. This prediction came true in December of 2017 when Bitcoin reached a peak value of $19,783.06 USD per bitcoin. This sudden boom in price and popularity brought this cryptocurrency to the centre of attention of media across the globe. This price, of course, has peaked and troughed since then.

How many cryptocurrencies are there and what are they worth? 

More than 6,700 different cryptocurrencies are currently traded publicly, according to CoinMarketCap.com (a market research website). The total value of all cryptocurrencies on February 18th 2021, was more than $1.6 trillion, and the total value of all Bitcoins, was approximately $969.6 billion USD. On March 3rd 2021, the bitcoin trading price was $48,697.60 USD per bitcoin.

Bitcoin is increasingly viewed as a legitimate means of exchange. Many well-known companies including Microsoft, Expedia, and WordPress accept Bitcoin payments, though most partner with an exchange to convert Bitcoin into fiat currencies before receiving their funds.

Why are cryptocurrencies popular?

• Supporters see cryptocurrencies such as Bitcoin as the currency of the future and are racing to buy them now, presumably before they become more valuable

• Some supporters like the fact that cryptocurrency removes central banks from managing the money supply, since over time these banks tend to reduce the value of money via inflation. 

• Other supporters like the technology behind cryptocurrencies, the blockchain, because it’s a decentralized processing and recording system and can be more secure than traditional payment systems

• Some speculators like cryptocurrencies because they’re going up in value and have no interest in the currencies’ long-term acceptance as a way to move money.

Buying cryptocurrencies can be a fun way to explore an experimental new investment. But it’s also true that any investment in cryptocurrency should carry a warning label like cigarettes do -

“This product may be harmful to the health of your finances, never buy more than you can afford to lose.” 

The following information is intended for informative and educational purposes only and is by no means specific financial advice. The purpose of our articles is to illuminate different facets of the of the financial world, so that you can make your own informed financial decisions.

Afterpay: The Ramifications

Dubbed the ‘modern day layby’, buy now pay later (BNPL) facilities like Afterpay and ZipPay are used by many Australians as a simple and alternative payment solution to their shopping needs - the major appeal being that users can make purchases without an upfront payment. Instead, shoppers are simply required to make four equal fortnightly repayments starting two weeks after the purchase date.

The BNPL industry is booming in Australia. According to a report by ASIC, the amount of credit taken out through BNPL services almost doubled in the 12 months to June 2019. There are also more than 6.1 million open BNPL accounts, which represents about 30% of the adult Australian population.

Buy now pay later services are particularly attractive to younger Australians who either don’t have a credit card or don’t want one. According to ASIC, 60% of customers are aged between 18 and 34 and 40% of BNPL customers are students or work part time, and the same number earn less than $40,000.
 
While there’s no doubting the meteoric rise and ongoing popularity of BNPL facilities, there are concerns that the platform may be contributing towards increased financial stress. Research conducted by Mozo shows some alarming figures surrounding the spending behaviour of buy now pay later users:

• 30% of survey respondents admitted to having missed at least one BNPL payment

• 65% said the ability to make smaller payments influenced them to make purchases they wouldn’t normally make

• Luxury purchases top the list of most frequent BNPL purchases, with 60% of respondents stating that they mainly used the platform to buy clothing.

Credit scores
 
Most buy now pay later providers say they may perform a credit check. This could be done when you apply for an account, and some providers may also do this when you make a transaction to make sure you can make the repayments. Credit checks carried out by credit providers are usually recorded on your credit report. While this won’t necessarily hurt your credit score, it will be visible to other lenders who look at your report. You do have to be careful if you’ve already made lots of applications for credit. If you make a number of applications for credit within a short space of time, this may flag you as a greater risk and negatively impact your score.

In addition to credit checks, most BNPL providers can also report negative activity on your account to credit reporting bodies. This includes missed payments, defaults and serious credit infringements. This can lower your credit score and will stay on your report for a period of time. For example, information about your repayment history (including missed payments) will remain on your report for two years, defaults will stay for five years and serious credit infringements will remain for seven years.

Other risks involved with buy now pay later facilities

• Fees can add up: Most BNPL providers do not charge interest and instead charge fees. This can include missed payment fees and account keeping fees. ASIC's report found that BNPL providers reaped over $43 million in missed payment fees in the 2018–19 financial year, with one in five BNPL users saying they missed a payment in the last 12 months.

• It could impact your future loan applications: According to Moneysmart, lenders consider BNPL spending when you apply for loans (e.g. a car loan or mortgage).

• It may be difficult to meet your repayments: In order to meet their repayments, ASIC found that 20% of BNPL consumers cut back on or went without essentials such as meals, 15% took out an additional loan and 20% missed or were late paying other bills or loans. If you do miss payments on other bills or loan products, this could also hurt your credit score.

ASX: An Independent Market?

The ASX is Australian yet it is influenced by a global market. Activity in the global economy, particularly the performance of giants like the US, China, and Japan, can have greater sway over Australia's share market than Australian companies and economic data. Good news from the US, the world's biggest economy, is more often than not good news for markets in Australia, and the same goes for bad news. 

Certainly, there is local news which moves the Australian market - fundamental statistics on the economy from the Australian Bureau of Statistics; various measures of business and consumer sentiment; any hint of a change in policy by the Reserve Bank; a trend in recent profits results from ASX-listed companies, or anything else which may change the way people see the market.

Consider this - about 40 per cent of Australian shares are owned outside of Australia, and these people and institutions are influenced just as much by where they’re headquartered, and what they read and hear every day, as by published data and company announcements in Australia. And what’s happening in the rest of the world is what they’re going to hear.

Do we need to watch the ASX when we could just keep an eye on the Dow Jones or the Nasdaq?

The ASX 200 and S&P 500 both had their 2020 peaks on 20 February (Australian time). Then, the ASX 200 fell 36.53% between 20 February and 23 March where it found its bottom. As for the S&P 500, it fell 33.92% over the same period and also found its lowest point for the year on 23 March.

3 months later in June, the ASX 200 had risen approximately 35% off these lows. The S&P 500 was up 43%. So here we can see a same-day peak, a same-day trough and very similar gains and losses in between for both the US and Australian markets in 2020.

As much as we might like to think that our own Australian markets are independent of the US, the data doesn’t suggest this conclusion. Of course, there will always be localised nuances that move each market independently of the other. But on the big issues, it would appear that American market is steering the ASX most of the time.

What does this mean for ASX 200 investors?

If you’re aspiring to be a serious investor but you don’t take an active interest in what the US markets are doing, it’s probably a good idea to change that habit. As much as we’d like to think of ourselves as independent of the US, the data shows this is not really the case.

2021: An Opportunistic Year

There has been plenty of talk about 2021 being a very opportunistic year, and at PGA Advisory we couldn’t agree more! There are a combination of factors that have come together to create some ideal circumstances in the world of finance and real estate.

Firstly, last year was tumultuous to say the least but it was also very rewarding for many people. We saw plenty of people taking their finances more seriously by taking action and implementing strong pillars to ensure financial security. On the flipside, we also came across many people who were (and still are) putting off taking control of their finances. Now is the time to be smarter than we ever have been with our money and to take advantage of what is available to us. If we take action now, we'll reap the benefits in the years to come. 

Secondly, back in October the Federal Government said the current credit laws were outdated, particularly given the economy had been plunged into recession because of the pandemic. It proposed new laws to reduce verification procedures, meaning borrowers would not need to hand over as much information to banks and, in turn, shortening the length of time it takes to secure loans. Borrowers would also be made more accountable for providing accurate information to lenders under the new laws, which will come into effect in March if they pass Parliament, and will replace the current practice of 'lender beware' with a 'borrower responsibility' principle. The Government said strong consumer protections would be maintained under the law changes and credit providers would still need to comply with their existing licensing obligations to act efficiently, honestly and fairly.

Thirdly, interest rates are at the record low of 0.1% meaning it is as cheap as it ever has been to borrow money. The Reserve Bank outlined it did not expect to raise the cash rate over the next three years until actual inflation is sustainably within the 2% to 3% target range, which will require wage growth and significant gains in employment. Inflation is forecast to be 1% in 2021 and 1.5% in 2022 according to RBA. This will provide homeowners and business with some certainty over their individual borrowing rates in the near term.

Finally, the property market is booming. The proof is now in the pudding that people should have purchased last year as property values are steadily climbing. On top of that, the commercial real estate market  is feeling the pain as more people are working from home. Because of this, regional areas outside of Melbourne and other capital cities have gone up significantly and the trend is more than likely to continue as working from home has become a part of the new normal.

With all of these factors considered, we can be optimistic about the year ahead. We've handled the virus incredibly well, and although the pandemic isn't over, we should all be inspired by how much we've been though and by how far we have all come. Being unsure of what is ahead of us is something that we all need to embrace. There was uncertainty with the GFC, there is currently uncertainty with the pandemic, and there will be uncertainty again.⁠ Uncertainty calls us to implement strong financial pillars to hold down the fort when times get tough. Let's focus on all of the opportunities that are available to us and make 2021 a year to remember.

2020: An Unforgettable Year

There is no doubt that 2020 has been an unforgettable year. It has been a year full of unexpected events, a year of sudden changes; it has been a year that has asked us to think on our feet, to make difficult decisions, and to accept the unknown. Now that we have come to the end of the year, as a company we are looking back and seeing all of the incredible changes we have made, all of the hurdles we have leapt over, and all of the challenges we have overcome. We never thought we would see the bright side of a world-wide pandemic, but here we are, with a company that is one year older, one year wiser, and undoubtedly more resilient than ever before. 2020 has strengthened us and shown us that we can withstand a storm - no matter how relentless.

Here's what we've been bringing to life at PGA Advisory while we've been working from the comfort of our homes and from the office:

· Pre-pandemic we launched PGA Private, a private platform for our clients where remarkable deals on one-off properties are offered. PGA Private also became the home of Health Is Wealth, a complimentary program designed to inspire our staff and clients into a life of wellbeing, through monthly workshops with various health professionals.

· We have solidified an enviable finance team, as well as launching PGA Financial.

· We've revolutionised our workflow processes by upgrading technology on many fronts, with CRMs now enabling us to be more efficient and access more in-depth and complex reports.

· We have spent time extensively researching upcoming areas for our clients to invest in, and we are excited by what we have discovered.

· We've recruited quite a few more staff members which we are lucky to have on board, as well as moving a couple of members of the team into more appropriate seats on the PGA bus. These changes will undoubtedly be a contributor to further success in 2021.

· We have had a massive contribution to social media which has uplifted our brand identity and allowed the space to share financial education with the wider public.

· In September we announced the launch of our second branch to be located in Sydney, taking PGA Advisory one step closer to becoming a nationwide company!

In amongst bringing all of these projects and changes to life, we've managed to support each and every one of our clients and staff alike. Without you, we know we would not be where we are today, and so from the bottom of our hearts, we want to thank you for navigating through this unforgettable year with us.

From the whole team at PGA Advisory, we wish you a very Merry Christmas and a Happy New Year!

We will be out of the office from Friday the 18th of December until Monday the 4th of January, although we will be online to support you should you need us.

Stamp Duty Discounts

To stimulate the property market, the Government will waive up to 50% of stamp duty on newly built or off-the-plan homes valued at up to $1 million until June 30 next year, as announced in the 2020/21 budget released on 24 November.

The Government will waive a percentage of stamp duty for residential properties valued up to $1 million as follows:

- 50% waiver on purchases of newly built or off-the-plan residential properties; and

- 25 % waiver on existing residential properties.

The waiver applies to contracts entered into on or after 25 November 2020 and before 1 July 2021.

The increase in the threshold of the value of residential properties to $1 million (instead of the previous $750,000 threshold) will mean that more people will be eligible for stamp duty discounts.

Together with other subsidies announced in the budget, the government intends that this will fast-track Victorians into homeownership and stimulate the property market.

The change also reflects a saving of up to $27,500 for buyers of a new home, and a saving of up to $13,700 on the purchase of an established home.

The 50% stamp duty concession for commercial and industrial properties in regional Victoria has also been brought forward to January 2021 to support business to open, relocate or expand.

The Government has also extended the $20,000 First Home Owner Grant for those buying or building a new home in regional Victoria. This Grant will continue to apply to contracts signed up to 30 June 2021.

Victoria’s stamp duty reforms follow suit after the NSW Government’s budget revealed a possible phase out of stamp duty and shift towards a new land tax instead.

In line with its aim to increase housing supply for renters, the Government will also support the build-to-rent sector by offering a 50% land tax discount for eligible build-to-rent developments, including an exemption from the absentee owner surcharge, until 2040. These tax changes will make the new social housing projects more viable.

If you have any questions about how this applies to your situation, we're here for you.

Sydney, We're Hiring!

PGA Advisory will be opening in Sydney in early 2021 and we are on the search for our founding team!

We are looking for both Sales Executives and a Senior Consultant.

See details below for job descriptions.

Sales Executive

The candidate for this position will excel at closing new customer opportunities. By using a consultative approach to selling, this person will use their expertise to identify and qualify leads, leading to sales opportunities.

You are efficient, reliable, and able to work independently with consistent productivity. Ideally you have prior experience in sales and telemarketing in addition to a keen interest in property and finance.

Salary is above market price (subject to experience) in addition to generous commission and bonuses. 

Responsibilities

• Meet and exceed sales targets

• Successfully create business from new customer data

• Manage complex negotiations with senior-level executives

• Build rapport and establish long-term relationships with customers

Qualifications/Skills

• Must have prior experience in sales/telemarketing (not industry-specific although preferably real estate/finance)

• Experience and working knowledge of CRM systems

• Strong written and verbal communication skills

• Ability to work in a high-paced environment

• English as a first language

PGA Advisory is a financial services company, founded and based in Melbourne, Victoria. Due to a successful 5 years of operation, in addition to client demand, PGA Advisory is now expanding into the Sydney market and will be opening a second office in metropolitan Sydney in early 2021. PGA Advisory is looking for founding staff to launch business in Sydney in the new year.

Senior Consultant

The ideal candidate will have strong presentation skills which will enable them to clearly present solutions to clients. They should have a keen interest in property and finance structures, as well as the ability to examine and streamline processes in order to make them more efficient. They should be comfortable conducting research and analysis in order to establish a good understanding of the business at hand.

You are efficient, reliable, and able to work independently with consistent productivity. You are a natural leader and have a keen interest in real estate and finance.

Salary is above market price (subject to experience) in addition to generous commission and bonuses. 

Responsibilities

• Facilitate both property and sales presentations

• Facilitate and attend client meetings

• Offer strategic and practical solutions to client problems

• Present findings to client in a clear and concise manner

• Identify opportunities for improved processes

Qualifications/Skills

• 2+ years of experience in related field

• Must have an agent’s representative license for real estate

• Strong communication and presentation skills

• Ability to work in a high-paced environment and manage multiple projects

• Proficient in Microsoft Office

PGA Advisory is a financial services company, founded and based in Melbourne, Victoria. Due to a successful 5 years of operation, in addition to client demand, PGA Advisory is now expanding into the Sydney market and will be opening a second office in metropolitan Sydney in early 2021. PGA Advisory is looking for founding staff to launch business in Sydney in the new year.

To Apply

If you meet the criteria listed within the job description, send through a cover letter that includes the position you are applying for, as well as your resume to phoebe@pgaadvisory.com.au.

If you are successful, we will be in touch.

A Financial Review Of Your 2020

The end of the year calls for a review of what has taken place over the past 12 months, and what a challenging year it has been for the entire world.

Taking an honest look at where your finances were at the start of 2020, and taking a look at where they are now can give you a good idea of what has worked, what hasn't, as well as what needs to be implemented (or omitted) in order to make 2021 the best year yet.

Reviewing your finances before Christmas will also give you some clarity on what you can afford to spend during the festive season, and this will hopefully ensure you stay within the boundaries of your budget and on track with your financial goals.

Firstly, make time in your diary to do this. Block out a morning or an afternoon, dedicated to reviewing 2020 by writing down your answers to the following questions:

• Where was your financial position at the start of the year?

• What were you planning on bringing to financial fruition?

• What were you stressed about at the start of the year?

• Have you implemented a plan that has helped you to feel more at ease?

• If you have implemented changes over the year - what worked?

• What are you sure and unsure about?

• What questions do you need to be answered before the year comes to an end?

• Write down the top 3 things that you want to implement in 2021, and ask yourself why you want to implement them - how will they change your life in a positive way?

• In regards to your home loan, how are your repayments going?

• If you have an investment property, how has its performance changed over the past 12 months?

• If you have shares, how is their performance going?

• In regards to your income, where are you spending your money?

• Where are you unnecessarily spending your money?

• Where can you be saving? Cut these costs as immediately as possible.

Secondly, take an honest look at what you haven't achieved:

• Did you get your credit card debt under control?

• Did you manage to save as much as you had planned?

• Did you discuss your tax bills with a professional?

• Did you increase your sense of financial stress or did you get on top of it?

• What else hasn't worked this year?

• What have been your 3 biggest challenges in 2020?

Thirdly, remember that at this festive time of year, it is important to be smart with your money and to not spend where you really don't need to. What is your budget for Christmas? Put aside what you want to purchase and look at what you can actually afford to purchase. Keep in mind the events and other extra expenses this time of the year brings too. Be sensible with your money, and for most of us, that means making some sacrifices. When it comes to gifts, remember that it Is the thought that counts.

Making positive changes in our lives requires considered thought and attention. If we don't take a moment to reflect on what we have and have not achieved, then what really needs to be changed won't change. As the saying goes - if you always do what you always did, then you will always get what you always got. Reflecting is key!

If you are in need of assistance with any areas of your finances, as always, we are here for you.

Cash Rate Cut to 0.1%

The Reserve Bank (RBA) has dropped the official cash rate by another 15 basis points to a historical low of 0.1% in an attempt to boost Australia's economy.

The move from 0.25% to a near-zero rate follows the second lockdown in Victoria that hit our nation's economy hard, as well as mounting pressure on the central bank to do more to support employment.

RBA governor, Philip Lowe said these measures would help to address the high rate of unemployment, which he described as an important national priority. Lowe further states that the country's unemployment rate was likely to remain high, although will peak slightly below 8%, rather than the 10% previously expected. He said it was forecast to drop to 6% at the end of 2022.

RBA outlined it did not expect to raise the cash rate over the next three years until actual inflation is sustainably within the 2% to 3% target range, which will require wage growth and significant gains in employment. Inflation is forecast to be 1% in 2021 and 1.5% in 2022 according to RBA. This will provide homeowners and businesses with some certainty over their individual borrowing rates in the near term.

According to Dr. Andrew Wilson of My Housing Market, Australia’s economy is turning a corner-

"Recovery has proved more positive than expectations and will continue to surprise on the upside with the reopening of borders fuelling a tourism and hospitality surge. The underlying indicators are strong for Australia to lead the world in a recovery."

How will the rate cut affect homeowners and the housing market?

The rate cut will assist Australia's economy to recover by lowering financing costs for borrowers. Low rates for an estimated three years means that it is as cheap as it has ever been to borrow money. This is great news for those who are paying down a mortgage and is encouraging for home buyers wanting to enter the market.

The rate cut will help to boost the residential property market that already appears to be in recovery mode which can provide a powerful charge to economic recovery. The housing market has a broad reach into other areas of the Australian economy and so the boost a cut provides should not be underestimated.

Let's say a homeowner with the average mortgage of around $480,000 were to drop from the current average variable rate of 3.99% to 3.84%, they would pocket an extra $495 per year. Over the course of a 30-year loan, this would save them almost $15,000 in interest.

There is no doubt the rate cut can save homeowners plenty of money on their mortgage. Experts are suggesting that if your lender isn't going to pass on the savings, then it is time to refinance to a more competitive deal.

Now is definitely not the time to be complacent. Take action and use this opportunity to reduce your mortgage.

Your Super, Your Future

According to a recent retirement survey conducted in Australia, 1 in 2 Australians don't feel confident about retiring, and 23% of those people have said that they will have to work for longer because of the super they have accessed during this COVID-19 period. Treasurer Josh Frydenberg has forecast that up to $42 billion in superannuation will be accessed prematurely by Australians before the end of the year, due to the pandemic. To date, 560,000 Australians have completely cleaned out their superannuation accounts, 460,000 of those people being under 35, according to Industry Super Australia chairman, Greg Combet.

When it comes to superannuation, many Australians are aware that retiring with enough money to continue living their desired lifestyle isn't a circumstance that will come about just through working alone. The unfortunate reality is that many people underestimate how much super they will need to uphold a comfortable and enjoyable lifestyle during retirement.

Yes, you must consider how much you will need, but what we really encourage you to consider is how much you want for your retirement years. Do you want to continue living the type of lifestyle you have lived throughout your working years? Would you be happy to live more frugally, without holidays and all of the extras? Or do you want the last chapters of your life to be generous and enjoyable, with a sense of freedom that you may not have experienced while working 5 days a week?

A study by the World Economic Forum has revealed that most Australians will outlive their super by 11 years showing us that innovative super strategies are being called for. For a comfortable future, we all need a comprehensive and detailed financial plan.
 

Superannuation Benchmarks

 The Association of Superannuation Funds Australia has outlined the following benchmarks for retiring comfortably. At each of these age brackets, they suggest you have the following amount of money in your super:

30 years old - $61,000

40 years old - $154,000

50 years old - $271,000

60 years old - $430,000

67 years old - $545,000 (singles) & $640,000 (couples)

Are you on track to retire?

Many of us are not on track, and if you do fall short in the categories above, don't stress. We're here to remind you that living the best years of your life through retirement is not out of reach - it just takes implementing accurate and effective strategies today, so that you can reap the benefits when your working years come to an end. We are committed to providing tailored, long-term, and tax-effective strategies to assist Australians in creating a stable path to retirement.

Federal Budget 2020 - 21

Treasurer Josh Frydenberg handed down his long-awaited 2020-21 Federal Budget on Tuesday. As we are all well aware, COVID-19 has had a huge impact on the economy meaning that there has never been a more relevant budget for Australians. The Budget is extensive, so we've taken it upon ourselves to provide an overview of what we believe is relevant for our clients.

Tax Cuts

The tax offset was supposed to come to an end when stage two of the Government's tax cuts came into force, and while the Government has decided to bring forward the cuts, it won't ditch the offset, yet.

It will remain for the 2020-21 financial year, letting workers keep an additional $1,080 on top of the tax cut, but will snap back in 2021-22, meaning middle-income earners will pay more tax next year than they will this year. 

The stage two changes alter the boundaries of the 32.5% income tax bracket, meaning people will pay 19 cents or less for every dollar earned up to $45,000, then 32.5% on every dollar earned between that and $120,000.

JobKeeper

The Budget makes no changes to the March 28 end date of the JobKeeper wage subsidy, but does outline a fresh wage subsidy.

The JobMaker Hiring Credit will partially subsidise the wages of young employees who are hired from Wednesday 7th October, but there are some conditions employers and employees will have to meet. 

Employers will be able to claim $200 each week for every employee hired after Wednesday 6th October, aged between 16 and 29, and $100 each week for every employee aged between 30 and 35.

Employees will also need to:

• Have been on JobSeeker, Youth Allowance or the Parenting Payment for at least one of the past three months.

• Begin working at the claiming business between October 7 2020 and October 6 2021

• Work an average of at least 20 hours a week over the reporting period

The cost of the scheme will be $4 billion, with the Treasurer stating it will target youth unemployment, estimating that this will support around 450,000 jobs for young people. Obviously, this puts people who are unemployed and over 35 in a tough situation.

The only businesses explicitly excluded from the scheme are the major banks.

Housing Affordability

The Government will allow an additional 10,000 first home buyers to obtain a loan to build a new home or purchase a newly built home with a deposit of as little as 5% under the

existing First Home Loan Deposit Scheme. Applications will be available until 30 June 2021. Eligible first home buyers may also be able to take advantage of the First Home Super Saver Scheme to use the concessionally taxed superannuation system to save their first home deposit.

In addition, under the HomeBuilder Scheme, existing owner-occupiers, including first home buyers, may be eligible for a grant of $25,000 to build or substantially renovate an existing

home. First home buyers may also be eligible for state and territory grants and concessions.

These measures are designed to promote home ownership and support employment in the construction industry.

Infrastructure

Since the start of the COVID-19 pandemic, the Government has committed to invest an additional $14 billion in new and accelerated infrastructure projects over the next four years. These projects will support a further 40,000 jobs during their construction. This investment is part of the Government’s 10-year transport infrastructure investment pipeline, which has been expanded to $110 billion and is already supporting 100,000 jobs on worksites across the country.

This investment pipeline includes projects in every state and territory, as well as the generation-defining Melbourne to Brisbane Inland Rail and Western Sydney International (Nancy-Bird Walton) Airport. 

Businesses

The Government will offer "temporary full expensing" to businesses, to encourage them to invest. Effectively, businesses that make new investments will be able to write off the entire cost in one year, rather than having the asset depreciate over several years.

The scheme will be available instantly to all businesses with a turnover of less than $5 billion each year. Other changes will help businesses to more easily offset their tax losses against past profits.

Assumptions underlying the Budget

The economic assumptions underlying the Budget predict a COVID-19 vaccine will be rolled out to Australians by the end of next year.

The Budget also assumes we won't see any more widespread outbreaks of COVID-19 — and the associated lockdowns — as has been the case in Victoria. Economic assumptions rely on all state borders being open by Christmas, with the exception of WA.

Assumptions relating to the tourism economy and international travel are somewhat gloomier, with inbound and outbound travel expected to remain low through the latter part of 2021, after which a gradual recovery in international tourism is also assumed to occur. Off the back of that, net overseas migration is expected to fall by 72,000 people.

How much will the Government spend this year? 

This financial year, the Government will be spending $213.7 billion more than it will make. Furthermore, the Budget estimates the headline unemployment rate will peak at 8 per cent between now and the end of the year with the Treasurer stating the Government will not focus on reducing the debt until employment has reached that benchmark.

The US Election & Australia's Economy

How is the US election affecting Australia's economy?

America is currently digging itself out of the deepest US recession since the 1930s and 1940s, in addition to high unemployment rates, civil unrest and the biggest health crisis in a century. The situation in America is causing uncertainty world-wide, and the upcoming Presidential Election is bringing about further unrest. But what effect is the US election having on our economy here in Australia?

The US election is affecting the Australian share market more than any other investment type, as the fortunes of the ASX are intrinsically linked to how the US markets perform. As we've heard it said - when America sneezes, Australia catches a cold.

Back in 2016 when Trump won the Presidential Election, the S&P/ASX 200 took a big dive. With the uncertainty in America at the moment, stocks are moving up and down on a daily basis.

It is more than likely that the US election (to be held on Tuesday, 3rd of November) will be a market-moving event and it is unlikely that we will see any form of stability within the share market until then.

The extreme nature of this election makes it hard to predict how markets will react, but whatever happens we should expect some large moves either way. Whether it is Trump or Biden that wins the election, the outcome will indeed dictate our market.

We're Opening in Sydney!

With the success and growth we have experienced in Melbourne over the past five years, we are excited to announce that we will be opening our second office in Sydney in January 2021.

As our client-base has been steadily building , our presence in Sydney is now being called for.

Our Sydney office will be run by a different team, so everything that you are familiar with in regards to our Melbourne office will remain exactly the same - business is as usual.

We will be bringing PGA's flavour, our ethos, and our culture to Sydney so that we can assist even more Australian's to accelerate financial success.

We want to thank each and every one of you, our valued clients, for being on board this journey with us, and for being a vital part of our company.
We wouldn’t be where we are if it wasn’t for you.

From the whole team at PGA Advisory, we want to say a very big thank you!

Melbourne's Property Market

What has been happening within the Melbourne property market during this COVID-19 season?

Housing values in Melbourne moved through a fourth month of decline over August. Cumulatively, there has been a 3.5% decline between the peak in March and the end of July. The decline in home values has been more significant across the top quartile of the market, where values have been down 4.5% over the past three months, according to Michael Yardney from Property Update.

Housing market conditions have been weaker than other capital cities, which can be attributed to the impact of COVID-19, in addition to Melbourne’s exposure to overseas migration and foreign students as a source of demand.

On a more positive note, buyer activity has improved over the past three months, after sales fell by around 41% in April, according to CoreLogic.

A recent report by our associates at Blue Earth Property Group has revealed some very positive figures in regards to the future of Melbourne's property market as well as the regional Victorian market.

Supply and demand are the key drivers behind all property markets, and the numbers are stacked heavily in favour for Victoria.

Population growth drives demand and Victoria has the fastest growing population of any state within the country, with an annual growth of 122,249 people. With an average household of 2.4 people, Victoria needs 50, 937 new homes per year.

The top 5 population growth areas in metropolitan Melbourne and regional Victoria are as follows:

It is expected that by the end of 2026, Melbourne's population will outweigh that of Sydney, making Melbourne Australia's most populous city, increasing our political power, global status, and economic strength. 

“The largest population creates a gravitational pull that will begin to attract more global organisations, big events and the head offices of national and regional institutions. New institutions will also be drawn by being located in the nation’s largest city", according to Mark McCrindle, from McCrindle Research.

Melbourne's population, which is expected to become home for 75% of Victorians, is estimated to grow nearly 30% faster than Sydney over the next six years, according to the latest estimates. In addition to this, Melbourne is 20% more affordable than Sydney, according to a recent report by SQM Research.

So, while there has been a dip in the property market over the past few months due to COVID-19, the future is definitely looking bright for Victoria. It is onwards and upwards from here.

Economic Review

As we walk further into this financial year, let's take a look back to see what took place during the 2019 - 2020 financial year.

We had the worst bushfire season we have seen

• Approximately 17 million hectares of land burned

• 3,094 homes lost and sadly 33 deaths

• Devastation to our beautiful wildlife

As we walk further into this financial year, let's take a look back to see what took place during the 2019 - 2020 financial year.
 

We had the worst bushfire season we have seen

• Approximately 17 million hectares of land burned

• 3,094 homes lost and 33 people died

• Devastation to wildlife

Just as some of our rural communities were getting back on their feet and preparing to welcome visitors to their communities, we faced the concerning realisation that COVID-19 was making its way to Australian shores.

The emergence of COVID-19

Here are some numbers to date (as of August 20):

• 22.2 million cases globally (24,000+ in Australia)

• More than 783,000 deaths globally (450+ in Australia

• An estimated 3.5 million Australians filed for JobKeeper at a cost of $70billion

• According to the RBA, unemployment was expected to peak at 10% in the June quarter (thankfully, it did not).

While the above numbers may seem shocking, Australia has avoided both a health and economic catastrophe. Life pre-COVID-19 almost seems difficult to remember, although it certainly wasn’t all doom and gloom for Australia. Over the past 12 to 18 months it’s important to reflect and appreciate the economic position we were in before COVID-19 hit. Consider these numbers -

Gross Domestic Product (GDP)

A measure of Australia economic growth was as follows:

• Jan-Dec 2019 GDP – 2.2%

• Jan-March 2020 GDP – 0.3%

• March 19-March 2020 GDP – 1.4%

Australia’s Budget

In December 2019, the Government was on track to deliver the country’s first budget surplus in a decade, of between $5-7billion.

Employment

In 2019, the unemployment rate was 5.18%, almost a 10 year low (in 2011 it was 5.08%)

Market Returns

Oil price goes negative

As the global economy shut down, the demand for oil greatly reduced and the oil price followed. This left a huge surplus on the market and no buyers, thus, some holders of oil futures were willing to pay others to offload contracts for oil they would be unable to store, which actually saw a negative price per barrel for a short period. Storage capacity on land has filled up quickly and some have resorted to storing oil by sea, paying up to $100,000 per day to lease tankers for storage purposes.

After briefly dipping to -$37, the oil price has since recovered to around $39.

The year ahead

It seems like a realistic point of view to see that economies are never as good as they seem, and never as bad as they are predicted to be. In Australia, we have dodged a bullet economically. The Government has shown a commitment to rescuing the Australian economy from financial ruin and we are seeing further stimulus being provided to see us through this challenging period. 

Considering we have had two consecutive quarters of GDP decline, we are in a recession, but are we heading for a great depression? Definitely not.

If we could take anything from the United States it is their confidence and optimism in recovering from a challenging time. COVID-19 has a tighter grip on them, however, the US stock market just notched its best quarter in decades, gaining 17.8%.

We are amongst tough times, but having a lack of confidence is not going to help us to recover from adversity. We have to stay resilient, persevere, and continue to work hard- times are tough, but we are pulling through.

Working From Home

We know that working from home can be a challenge. Managing a work/life balance is difficult at the best of times, and now that we have to stay home, our sense of well-being and productivity are being tested. Mental health rates within Australia have greatly increased since the onset of COVID-19, and so keeping an eye on our personal well-being is vital at this point in time.

To support you on your quest for maintaining high-levels of productivity and well-being during this difficult time, we have compiled a list of things that you can do to make working from home just that little bit easier.

Establish A Routine

Whether you are going into the office or working from home like the majority of us, you need to be organised and be ready to start on time. Although your morning routine may change slightly, stick to doing those things that help you to feel prepared for the day. Wake up at the same time every day, drink 500ml of water when you wake up, exercise, meditate, eat a nourishing breakfast, and give yourself time to switch-on and get ready for the day ahead.

The need for routine doesn't end once your morning routine is complete. Develop a complete workday routine - have lunch at the same time each day, take your morning and afternoon tea break at the same time, and clock-off when you normally do. Establishing a routine gets your body working like a clock. Routine gives your body the ability to anticipate what is coming next. Develop a routine and stick to it, you will feel grounded and mentally clear because of it.

Boundaries

It is really, really important that we establish clear boundaries when working from home. This means that when you are working, you are working and when you are relaxing, you are relaxing - there is no in-between. Making sure the people that you live with are on board with your workday routine is important. Let them know that for the next 4 hours until lunchtime, you are working, so they won't expect to have your attention until you sit down for lunch.

Establishing boundaries is a great way to upkeep work productivity but it is also a great way of nurturing the relationships you have with the people that you love most. When you are in relax-mode, be present with the people in your life, give them your full attention, and don't be looking at your phone, or typing an email while you are in conversation with them. Do one thing at a time. It is easy to become all-consumed by work when working from home when your home is usually the place that you relax and spend time with those that you love. Taking care of your relationships is just as important as taking care of your work productivity.

Set And Setting

It is important that you set up a space where you work, a space that is only for work. Some are lucky enough to have a study or office, and others are not. If you don't have a study, set up a space on one end of your dining room table, or in another area of your home that is just for work. What this does is let your body and mind know that when you sit down in that space, you are working. If you wear glasses for reading, pop your glasses on when you sit down for work, and take them off when you are having your lunch break and clocking-off for the day. When your day 'in the office' is done, tidy up your working space to make it inviting for tomorrow's day of work. Similarly, when you are switching over into relax-mode, take a shower, get changed into your comfy clothes, soften the lighting in the house, throw your slippers on and totally switch-off from work for the day. This will notify your body and mind that work is over and it's time to relax.

Change Your Environment

Although we are limited with reasons as to why we can leave the house, changing up your environment by getting outside will do wonders for your sense of well-being and for your ability to maintain productivity. Whether it's going for a walk, a run, or a ride or going to the grocery store, the market, or the park, getting out of the house once a day will help you to reset and it will make your home more inviting to return to.

Times are tough right now, but let's remember that this could be worse. Having a daily rhythm provides you with the conditions to feel your best and to do your best. If we fail to take care of ourselves, it's our health and our ability to do good work that is compromised. Let's see this situation we are in from a glass-half full perspective, let's embrace the cards that we have been dealt and come out the other side feeling stronger than we ever have. Each day offers us the chance to uplift and improve our lives, and just because we are stuck at home doesn't mean that has to change.