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Money Matters: September Edition

With the first quarter of the financial year come and gone, the reportable numbers provided very little flare. Interest rates remained, CPI (inflation) returned little to talk about and most government departments revised their numbers slightly lower. So instead of reporting the outcomes, this month I thought I would take a different approach. This month, I would like to take a walk down ‘Sentiment Lane’ and find out what Australian’s thoughts are about money to gain a better perspective of what will come out of the next quarter leading up to Christmas. Did you know? Many of the larger organisations – like banks and financial companies – survey Australians like you and I, on an ongoing basis to determine what our thoughts and opinions are about money, to produce statistics and reports that give the decisions makers a better perspective of what we do with our money and finances. So lets take a look at what some of the survey outcomes recently, and see if we can predict what the outcomes will be in the next quarter. Cash and Savings;
  • 34% of consumers believed the ‘wisest place for savings’ was bank deposits, which was up 7% from the previous month according to Westpac-Melbourne Institute Index of Consumer Sentiment)
  • 44% of households surveyed for the ING Direct Household Financial Wellbeing Index (August 2014) said their financial goal was to save more
  • According to the latest APRA statistics: Banks’ household deposits (i.e. cash and savings) grew by 2.1% over the three months to July 2014. While the banks mortgage balances only grew by 1.9% over the same period.
  • Term deposit balances rose from $529.2 billion to $539.8 billion (+10.6B)
In summary, Australians are opting for cash and savings than taking on more debt. Mortgage & Credit Cards;
  • Borrowers are paying off their loans at a rate much higher than that of lenders writing new loans on their portfolio
  • More Australians are making wiser decisions when they are using their credit cards due to the escalating surcharge costs when making purchases. Recent research by MasterCard, suggests that over one third of Australian consumers have abandoned a purchase after seeing a surcharge, while a quarter have looked for the same item elsewhere.
In summary, Australians are paying debt faster and also choosing what and when they use credit cards Property and Investing;
  • Property prices saw annual growth of 10.9% in August 2014; double that of 12 months ago.
  • Australia’s two largest property markets — Sydney and Melbourne — are driving growth in new borrowing with home prices rising by 16.1% and 11.7% respectively. In comparison, Adelaide, Brisbane and Darwin saw price rises of 5-6%.
In summary, a large proportion of the property purchasing has been by investors (not first home buyers) due to record-low interest rates and tax breaks but more so rising foreign demand has contributed heavily. Therefore based on the above it seems there is a bit of a pattern with the sentiment and how Australians have recently been handling their money and finances. I think the next few months (October to December) will be more of reporting “cautious measures” rather than actions. And with Christmas just around the corner, I feel that change – if any - will come post the Christmas (January 2015). Caution: With the “silly” season fast approaching, don’t let your hair down just yet. Stay smart and put a spending plan in place that takes you right through to February 2015. Retailers (whether online or in store) will be doing everything to entice you to make a purchase and if you can resist – you will be the winner. Tip: Reducing your spending for the coming October and November means you won’t break the bank in December and January. Sometimes it’s not necessarily about not spending, but planning better for when you need to spend.