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Slowing GDP growth a red flag to check super
Yesterday’s confirmation that Australia’s economy was at its weakest since the global financial crisis in 2009, with GDP growth under two per cent over the last year and growth of just 0.4 per cent in the first quarter, should serve as a warning to the public to protect their long-term financial security.
Leading advisory firm, Dixon Advisory, said that this low growth, combined with slower retail figures and the interest rate cut on Tuesday, should be a “red flag” to Australians to make sure they’re preparing for an ongoing slowdown of the economy.
This was particularly important for superannuation investments, as the task of funding retirement is only getting harder.
“Looking at how your investments are holding up against a slowing economy can help you decide which investments you want less of and what investments you want more on into the future, particularly as you get closer to retirement,” Dixon’s head of advice, Nerida Cole, said.
She recommended checking how clients’ superannuation is invested, and making sure their mix of shares and cash was appropriate to their debt levels and closeness to retirement. Advisers should also consider the impact of falling interest rates which, while good for borrowers, put pressure on retirees, and ensure that clients are getting the most out of superannuation’s tax benefits.
The 0.4 per cent result for the first quarter, compared to year-on-year growth of 1.8 per cent, meant that this was its weakest result since the GFC. Government spending and exports helped counter lower household spending to prop up the overall GDP result.
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The future of superannuation policy remains uncertain, with further reforms potentially on the horizon as the Albanese government seeks to curb the use of superannuation as a bequest vehicle.
Superannuation funds will have two options for charging fees for the advice provided by the new class of adviser.
The proposed reforms have been described as a key step towards delivering better products and retirement experiences for members, with many noting financial advice remains the “urgent missing piece” of the puzzle.
APRA’s latest data has revealed that superannuation funds spent $1.3 billion on advice fees, with the vast majority sent to external financial advisers.
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