Is the Australian dollar headed for more downside?

AMP Capital chief economist Shane Oliver says he expects the Australian dollar ($A) to weaken further – making unhedged offshore investments more attractive — as interest rates continue to rise in the US. However solid commodity prices should put a floor under falls.

So far this year the $A has fallen from around US$0.80 to around US$0.72. “I think the likelihood is it’s got more downside,” Oliver says.

He notes that there are two conflicting processes at work.

The “dominant” force at the moment is the US Central Bank, the Federal Reserve, which has been steadily raising interest rates – 25 basis points every three months. The next interest rate decision is in September. But at the same time Australia’s central bank, the Reserve Bank (RBA), has kept rates on hold for several years and is likely to remain doing so for some time to come.

“The result is that the interest rate differential between the US and Australia has gone strongly in favour of the US dollar and is attracting money into the US economy,” Oliver says. “Cash is being parked there as opposed to be parked in Australia. So that’s a big negative for the $A.”

The interest rate differential is the difference between official interest rates in countries. The RBA’s official cash rate sits at 1.5%. The current federal funds rate target is 1.75% to 2%.

“We think that [interest rate differential] has got a lot further to go because we expect the Fed will continue those rate hikes going into 2019 at least. But the RBA is leaving interest rates on hold through 2019, at least. So that interest rate differential will get wider, pushing the $A down probably to around US$0.70.”

Oliver says the other force impacting the $A is commodity prices. He notes that bulk commodity prices are solid with iron ore around US$65-70 a tonne recently and coal prices are strong. “That’s providing a degree of support for the $A.”

Oliver says that these strong commodity prices are probably going to provide a “bit of a floor” of around US$0.68 to US$0.69 “rather than pushing it [the $A] higher.”

But he says there are other risks. “If this trade war [between the US and China] gets worse, then that could turn into a negative as commodity prices come under pressure.” Similarly, the turmoil in some emerging markets led by Turkey is also creating uncertainty for global growth and adding to downwards pressure on the $A.

“The bottom line is, investors should expect more downside for the $A. That enhances the value of offshore investments which are unhedged. But I don’t see a crash in the $A unless commodity prices take a big hit.”

As the recent fall in the $A on the back of the Turkish crisis highlights, being short the Australian dollar and long (unhedged) foreign exchange (particularly the $US and Yen) could work in certain cases as a hedge against threats to the global outlook.

By Dr Shane Oliver
Head of Investment Strategy and Economics and Chief Economist, AMP CapitalSydney, Australia


Important notes


While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.

What every small business owner needs to know about paying super

small business owner bas business advisory statement tax ato

If you’re a small business with employees, it’s important to understand the rules about paying them superannuation.

Here are the main things you need to know.

When to pay super

The superannuation guarantee (SG) applies to employees 18 and over who earn more than $450 before tax in a calendar month.

Employees who are under 18 or do domestic work, such as being a nanny, must put in more than 30 hours a week before the employer is required to make SG contributions.

You may have to pay for some contractors.  Check with the ATO if you’re unsure.

How much to pay

The minimum is 9.5% of your employees’ ordinary time earnings (OTE). OTE includes things like commissions, shift loadings and allowances but not overtime payments.

How to pay

When it comes to paying SG contributions into employees’ super funds, you must use SuperStream, a system in which money and data are sent electronically in a standard format between employers, funds, service providers and the ATO.

There are several ways to implement SuperStream, including through super funds’ online portals or commercial clearing houses such as the tax office’s small business super clearing house (see or phone 1300 660 048).

You can use a payroll software package from MYOB or Xero to meet your SuperStream obligations, or you might prefer to seek the assistance of an accountant or bookkeeper.

How often to pay

You must pay super at least four times a year – the quarterly due dates are October 28, January 28, April 28 and July 28.You can pay more regularly if you like as long as the payments are all in by the deadline.

Also keep in mind that some super funds require employers to make contributions monthly. When you register with a fund with this requirement, you are agreeing to make monthly contributions to that fund, says the ATO.

Skip a payment and you could be hit with the ATO’s super guarantee (SG) and have to lodge an SG charge statement. The charge includes your super contribution shortfall, interest and an admin fee.

Where to pay

If your employee has nominated a fund, you must make payments into their chosen option. Make sure it  is a complying super fund or retirement savings account. You can check at

If the employee has not chosen a fund for themselves, you are required to pay SG contributions into a MySuper option. Many retail, industry and corporate super funds offer MySuper accounts, which are known also as “default” funds.

As a rule, these funds take a balanced/growth approach to investing, with 70% of assets in growth (for example, shares and property) and 30% in defensive investments (cash and fixed interest), according to the federal government’s MoneySmart website.

However, be sure to check with the super fund about its investment approach and whether it offers adequate insurance cover. Also check the fund’s returns using ratings websites such as and The free information provided by these and other independent ratings services can help you narrow down the MySuper contenders.

Within 14 days of paying an employee’s first SG contribution into a super fund, you’re required to supply the fund with the employee’s tax file number.

Claiming a tax deduction

Meet all your SG obligations and you can claim the super contributions you make on behalf of your employees as a tax deduction that financial year.

tax time small business

Don’t neglect your own super

Self-employed people have lower super balances than employees across all ages, with average accounts for self-employed males at around $155,000, compared with $386,000 for male wage and salary earners. For women, the difference is $86,000 versus $159,000, according to the Association of Superannuation Funds of Australia (ASFA).

You’ll need strong willpower and discipline to make regular contributions to superannuation but the rewards include the tax benefits as well as a bigger savings pool to fund retirement. One way to make it easier is to have your contributions automatically deducted from your bank account.

From July 1, 2017 the requirement that you derive less than 10% of your income from employment sources has been abolished and regardless of your employment arrangement you may be able to claim a tax deduction. Those aged 65 to 74 will still need to meet the work test in order to be eligible to make a contribution and claim a tax deduction.

Self-employed? Boost your own retirement savings

– Select a super fund from the time when you were employed so that you can use it for your self-employed contributions.

– Next you must make a contribution to your super fund within the limit of $25,000pa.

– You must make all your contributions for the year by June 30 if you wish to claim a deduction.

– Fill out a notice of intent form from your super fund. There is also one available online from the ATO website. This form lets the tax office know you intend to claim a tax deduction for your personal contributions.

– Your fund must acknowledge its receipt of the notice before you lodge your tax return for the relevant year. Then you can claim a deduction in your tax return for the contributions you made. Keep the correspondence from the super fund as proof for the tax office.

– If you change your mind about how much you want to claim as a deduction, you can vary the amount, provided you are still within the time limits specified for lodgement of the notice of intent. You must lodge a second notice specifying the higher or lower amount you wish to claim.

Most self-employed people can claim a full deduction for contributions they make to their super until the age of 75. You may also be eligible for the federal government’s super co-contribution payment. This helps low- to middle-income earners save for their retirement. If you’re eligible and you make personal super contributions, the government will put in up to a maximum of $500 depending on your annual income.

More than one-fifth of Australians in their mid 20s still live at home with parents: survey

Money is the most common reason for staying at home.

Twenty-five year old Nivea Lally makes a two-hour, 43 kilometre commute from Sydney’s Kellyville to Pyrmont every day. It’s the price she’s willing to pay to live at home rent-free in a bid to save up for her future.

She’s not alone; more than one-fifth of Australians aged between 25 and 29 still live at home with their parents, according to new research by comparison website

That figure doubles for younger Australians, aged 20 to 24.

The survey of more than 2000 people — across the country and age groups — found the average age children should start paying board is at 19.

“It seems to be the sweet spot nationally. That’s the age kids go to uni, start their first part-time job and generate income and become young adults,” said Graham Cooke, Finder insights manager.

But not everyone agrees on charging their children board. One in five Australians believe their kids should live with them rent-free regardless of their age or financial situation.

Ms Lally said her parents want to take care of her until she gets on her feet, financially speaking, because “rent money is dead money”.

“I put up with the two-hour trip every morning and afternoon just for the convenience of living at home,” she said. “If my parents asked me to pay for board I would do it and I completely understand how it would benefit me in the future as well.”

Money is the most common reason for a multigenerational household, according to UNSW City Futures Researcher Dr Edgar Liu, who wrote a study into this in 2012.

And with 25 per cent of Sydney’s population in this situation, the city has always taken out the top spot across Australia for the highest rate of this phenomenon.

“Many families are also actively choosing this living arrangement to better provide care for young children and the elderly (the second most common reason),” said Dr Liu.

Dr Liu’s research found a mother who had a deposit, but unstable income, and her daughter at university with steady employment, who could service a mortgage, who bought a house together. In other cases, parents put their children’s board aside as a home deposit for the kids.

Leo Patterson Ross, advocacy and research officer at Tenants Union of NSW, said Sydney’s high cost of housing, for buying and renting, left children living at home longer than usual too.

“I’ve spoken to classes at two different universities and courses where not a single person was renting in the private market,” he said, “because private rentals and property ownership has become more expensive we see middle-aged people and professionals still in share houses and being the only ones who can afford. They’re pushing out students as a result.”

While it makes sense for families who could afford to help their children save money, Mr Ross worries it exacerbates housing affordability and the likelihood of property ownership for those less well off.

“It raises the questions about the families who can’t afford to waive rent,” he said.

Mr Cooke said while children and parents don’t see eye to eye on when to start paying board, one thing is for certain: children don’t become financially independent earlier than their parents.

“Financial circumstances are not as healthy as those in the boomer generation because property prices and rents are so high at the moment. That’s forcing people to stay living with parents,” he said.

This article was originally published by Domain on 27 April 2018. It represents the views of the author only and does not necessarily reflect the views of Tailored Lifetime Solutions.

7 money personalities you may identify with or want to avoid

Are you the friend that shouts more than what you can afford, or the one that’s happy with a handout because no one knows struggle street like you do?

When it comes to money and people’s behaviour, you may have a few labels or preferred ways of describing those nearest and dearest to you – and surprise surprise, they may do for you too.

I mean, how many times have you heard someone say so-and-so is stingy, or a show pony, or was born with a silver spoon in their mouth, or on the flip side, too generous for their own good?

If it’s something you’ve been thinking about, we’ve listed some common money personalities that may shed some light on where change, or consistency, may be of benefit to you.

Which personality type are you?

The scrooge

Generosity is not your strong suit and whether or not there’s a reason for it, you don’t like giving and you don’t like spending, unless maybe it’s on someone else’s credit card.

You might be under the assumption you’re doing it tougher than everyone else (whether that’s true or not) and may tend to favour people in your life who are financially beneficial to you, even if you’re a financial burden on them.

The gambler

You spend more than what you can afford and then spend the rest of the time trying to make ends meet. Whether it’s on the races, high-risk investments, designer labels or anything that drains you of cash, you tend to operate under a cloud of secrecy.

These behaviours can often be damaging to you and those around you due to a lack of financial security.

The show pony

You buy only the best clothes, phones, accessories and even things you’ll never use as a status symbol. You host parties on your credit card and generally prioritise possessions over all else.

You’re more than likely racking up some debt in order to keep up with the Joneses, while you probably know a lot of scrooges who are more than happy to take whatever it is you’re willing to give.

The spoiled

You’re happy to sit back and relax as you’ve got your parents, a partner or an income coming from somewhere that ensures you’re able to live the lifestyle you’ve become accustomed to.

The situation however is probably stunting your ambition to do things for yourself, which may create issues down the track should no one be there to do it for you.

The enabler

You’re probably quite sensible when it comes to spending. You may even have quite a lot of cash stashed away which you’ve cautiously saved over the years. Your downfall however is associating with those who are often spoiled or scrooges – those who function on the back of your hard work.

You give them money and you even loan them money that you know they’ll never pay back. They resist being money smart because they know you’ll always be there to be money smart for them. And, despite the fact you may think you’re helping, you’re more than likely hindering their ability to help themselves.

The mentor

You’re often seen as the sensible one and your success generally comes down to hard work and not necessarily the biggest pay cheque.

You’ve always had a budget in place to ensure you live within your means. You pay your bills on time. You save for the future. You compare your providers every 12 months. And, you’ve even got a little left over to put toward the fun stuff.

The free spirit

You probably identify with a number of money personalities to a degree. Some days you’re a scrooge because you have to be, sometimes you’re a show pony when you’ve got cash to blow, and sometimes you lend money to people you shouldn’t.

You know you have the potential to be a mentor but you’re a bit of a procrastinator and not a massive fan of hard work, although you’ve often wondered what financial success you could have if you did spend an afternoon sorting out your finances and mapping out things to do on your bucket list.

Need a hand with your money matters?

Knowing which personality or personalities you resonate with when it comes to money could help you to make better decisions around the way you spend and save, and potentially work with others.

If you’d like some pointers, the following articles may be of interest:

The US economy – Is a recession imminent?

19 Jul, 2018

By Dr Shane Oliver
Head of Investment Strategy and Economics and Chief Economist, AMP CapitalSydney, Australia

Key points

If you are worried about a recession and a major bear market, the US economy is the key to watch.

While traditional measures of the US yield curve have flattened sending warning signs about future growth, it has given false signals in the past, is still positive and other versions of the yield curve point to rising growth.

Moreover, apart from very low unemployment, other US indicators still show little sign of the sort of excesses that precede major economic downturns, profit slumps and major bear markets.


Ever since the Global Financial Crisis (GFC) there has been an obsession with looking for the next recession. In this regard, over the last year or so there has been increasing concern that a flattening yield curve in the US – ie the gap between long-term bond yields and short-term borrowing rates has been declining – is signalling a downturn and, if it goes negative, a recession in the US. This concern naturally takes on added currency given that the current US bull market and economic expansion are approaching record territory in terms of duration and given the trade war threat.

The increased volatility in shares seen this year, including a 10% or so pull back in global shares earlier this year, adds to these fears. Whether the US is about to enter recession is critical to whether the US (and hence global) bull market in shares is about to end. Looking at all 10% or greater falls in US shares since the 1970s (see the table in Correction time for shares?), US share market falls associated with a US recession are longer lasting and deeper with an average duration of 16 months and an average fall of 36% compared to a duration of 5 months and an average fall of 14% when there is no recession. Similarly, Australian share market falls are more severe when there is a US recession. So, whether a recession is imminent or not in the US is critically important in terms of whether a major bear market is imminent. This note assesses the risks.

The long US economic expansion and bull market

The cyclical bull market in US shares is now over nine years old. This makes it the second longest since WW2 and the second strongest in terms of percentage gain. And according to the US National Bureau of Economic Research the current US economic expansion is now 109 months old and compares to an average expansion of 58 months since 1945. See the next two tables. So, with the bull market and the economic expansion getting long in the tooth it’s natural to ask whether it will all soon come to an end with a major bear market.


The yield curve flattens – but it’s complicated

The yield curve is watched for two reasons. First, it’s a good guide to the stance of monetary policy. When short-term interest rates are low relative to long-term rates it indicates businesses can borrow short and lend (or invest) long & this grows the economy. But it’s not so good when short rates are above long rates – or the curve is inverted. And secondly an inverted US yield curve has preceded US recessions. So, when it’s heading in this direction some start to worry. However, there are several complications.

First, which yield curve? Much focus has been on the gap between 10-year bond yields and 2-year bond yields which has flattened to just 0.3%, but the Fed has concluded that the traditional yield curve based on the gap between 10-year bond yields and the Fed Funds rate is a better predictor of the economy and it has flattened but only to 1%. Moreover, a shorter yield curve based on the gap between 2-year bond yields and the Fed Funds rate predicted past recessions like the longer yield curves but has actually been steepening in recent years which is positive.


Second, the yield curve can give false signals – the traditional version flattened or went negative in 1986, 1995 and 1998 before rebounding – and the lags from an inverted curve to a recession can be long at around 15 months. So even if it went negative now recession may not occur until late 2020.

Third, various factors may be flattening the yield curve unrelated to cyclical economic growth expectations including still falling long-term inflation and real rate expectations, low German and Japanese bond yields holding down US yields and higher levels of investor demand for bonds post the GFC as they have proven to be a good diversifier to shares in times of crisis.

Fourth, a flattening yield curve caused by rising short term ratesand falling long term rates is arguably more negative than aflattening when both short and long term rates go up like recently.

Finally, a range of other indicators which we will now look at are not pointing to an imminent US recession.

Watch for exhaustion, not old age

A key lesson of past economic expansions is that “they do not die of old age, but of exhaustion”. The length of economic expansions depends on how quickly recovery proceeds, excess builds up, inflation rises and the central bank tightens. The US economic recovery may be long, but it has been very slow such that average economic and employment growth has been around half that seen in post WW2 expansions. So as a result it has taken longer than normal for excesses to build up. Apart from flattening yield curves one area where the US is flashing warning signs is in relation to the labour market where unemployment and underemployment have fallen about as low as they ever go warning of a wages breakout and inflation pressure.


However, there is still arguably spare capacity in the US labour market (the participation rate has yet to see a normal cyclical rise) and wages growth at 2.7% remains very low. The last three recessions were preceded by wages growth above 4%. Secondly, while US GDP is now back in line with estimates of “potential”, what is “potential” can get revised so it’s a bit dodgy and more fundamentally, industrial capacity utilisation at 78% is still below normal of 80% and well below levels that in the past have shown excess and preceded recessions.

Thirdly, cyclical spending in the US as a share of GDP remain slow. For example, business and housing investment are around long term average levels as a share of GDP in contrast to the high levels in one or both seen prior to the tech wreck and GFC.


Finally, while the rising Fed Funds rate and flattening traditional yield curve is consistent with tightening US monetary policy, it’s a long way from tight. Past US recessions have been preceded by the Fed Funds rates being well above inflation and nominal economic growth whereas it’s still a long way from either now. See the next chart.


US likely to see overheating before recession

Apart from the amber lights flashing from the flattening yield curve and very low unemployment our assessment is that a US recession is still some time away as it will take time for excesses to become extreme and US monetary policy to become tight. Looked at another way, the US is still more likely to overheat before it goes into recession. We have been thinking recession is a 2020 risk. The end of the current fiscal stimulus around then would also be consistent with this. However, given the current slow pace in terms of building excess, that 2020 is a presidential election year – do you really think Trump will allow the US to go off a fiscal cliff then? – and with 2020 being the consensus pick for a downturn, the risk is that it comes later. Of course, an escalating trade war could mess things up earlier, although we still see a negotiated solution. The rising US budget deficit is a concern but it’s more of an issue for when the economy turns down as this is when investors will start to worry about its sustainability. And of course a 1987 style share market crash cannot be ruled out but probably requires a share market blow off before hand. In the meantime, the Fed has more tightening to do and while sharemarket volatility is likely to remain high as US inflation and short rates rise, excesses gradually build and given risks around Trump and trade, with recession still a way off the US and global share bull market likely still has some way to go.

Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided.