Will your partner pass this important test? + What to do with rate cut savings

Hi everyone,

Writing this from Adelaide after a couple of days focused on tourism and football issues. The next week will be fun as I’m touring the Barossa Valley, Flinders Ranges, Clare Valley and the new hotel at Monarto Zoo.

I’m showing a group of 13 friends the best of South Australia. We all met when our kids went to the same primary school back in the 1990s. We were the type of people who would organise the fundraising trivia nights and bush dances and we enjoyed each other's company. What started as a weekend away has turned into 30 years of traveling together.

We operate on a three-year travel cycle. Year one is a weekend away, year two is a week somewhere in Australia or New Zealand, and year three is two weeks overseas … and then the cycle starts again. It’s year two of the cycle, so I’m in charge of organising a week in South Australia.

We all have big families so don’t see each other much socially but it’s a group that’s very special to Libby and me. This travel tradition makes us appreciate long-standing friendships.

But despite being on the road for the next week, I’ll be keeping a close eye on all things money as Monday and Tuesday is the Reserve Bank board’s meeting day … and another rate cut is almost certain.

In this newsletter:

• Is it better to pay down the mortgage or invest the rate cut savings?

• What’s causing the housing crisis and how to fix it?

• How to identify and fight financial abuse.

• Property listings are down ahead of Spring Selling Season.

Is it smarter to pay off your mortgage or invest the rate cut savings?

After 13 back-to-back interest rate hikes, Aussie mortgage holders are getting some relief with the RBA starting a rate cut cycle which could continue through to the end of the year.

The cash rate has already dropped from 4.35 per cent to 3.85 per cent, with average borrowers' saving around $200 a month on repayments.

So what should you do with those savings?

It might not sound like much, but over time that extra cash can either quietly supercharge your finances – or disappear into your everyday spending without a trace.

Here are some options:

Option 1: Keep repayments the same and smash down your mortgage

One simple option is to put the additional savings straight onto your mortgage repayments. According to Betsy Westcott, a financial advisor who is a regular on my Your Money and Your Life TV show, the long-term benefits might surprise you.

“If you can redirect those savings and get that extra money going into the mortgage, that's going to, on average, save you about two years on your repayments,” she says. “And here's the real kicker - you'll save about $65,000 in interest.”

That’s a solid chunk of change over the life of your loan, and it’s money that’s no longer going to the bank. Instead, it helps you own your home sooner - a big psychological and financial win.

And while you could put that money in an offset account, Betsy has a word of warning. “We humans, we suffer with a desire for instant gratification,” she says. “If it’s sitting there available in the offset account, you're probably going to spend it.”

Instead, she recommends sending it directly to your mortgage or into a redraw facility: “It's just that little bit further out of reach.”

Option 2: Invest the saving for long-term returns

Of course, you could choose to invest that $100 a month instead. Over time, it could grow into something much more substantial.

“If you take that $100 and invest it for 10 years, and you get the return of the ASX over the last 20 years – which was 9.8% – in 10 years, that $100 is going to be worth more than $20,000,” Betsy says. “In 20 years, that's going to be worth over $70,000.”

Of course, that figure doesn’t include investment fees or tax, so the real return will be a bit lower. But it still shows how even a modest monthly amount can build serious wealth over time – if you’re consistent.

So, what’s the right move?

Betsy says there’s no one-size-fits-all answer: “Some people hate debt – it gives them the heebie-jeebies – so prioritising paying off debt, if you've got that kind of attitude, is going to be aligned for you. The most capital-efficient solution is often going to be investing it, but it depends on your goals.”

But what about other debts?

Before you even think about investing, you’ve got to clear the decks. If you’ve got high-interest credit card debt or personal loans, that’s where your focus should be.

“Those bad boys are taking you backwards financially and fast,” Betsy says. “So if you have them, it is a really sound plan to prioritise paying them off [and] shore up your financial position in case there are other things that happen outside of your control, like job loss or an economic downturn.”

She also recommends reviewing all your debts to see if it’s worth consolidating to save on interest and simplify repayments. “Sometimes, when I'm working with clients, they've never actually gone and mapped out what debts they have and what the interest rate is.”

Smart ways to invest your $100

Once you’re in a good place financially, that $100 can be put to work.

“If you don’t have some emergency savings in place, that’s what I would really be focusing on,” Betsy says, adding that her emergency fund is her ride-or-die. “Redirect those funds to a high-interest savings account just to build up $1,000 to begin with, but ideally three to six months’ worth of living expenses.”

Beyond that? It depends on your timeframe and your goals.

“If it's short term - one to three years - you’re going to be putting money in a high interest savings account. If it's something a bit more medium or long-term, you might look at things like exchange-traded funds, managed funds or building a modest share portfolio.”

The key, she says, is to match the investment to your goal: “When do I plan to spend this money? What's the purpose of this money? That will help you select the appropriate vehicle.”

Betsy’s golden rule?

“Practise engaging with your finances like it's a self-care activity, and make sure you've got that safety net in place and the skills to grow wealth.”

I reckon that’s sound advice. It doesn’t matter if you’re paying down your mortgage or investing for the future - $100 a month might not sound like much, but it’s what you do with it that counts.

What’s causing the housing crisis, and how to fix it

I’ve talked a lot about the housing shortage and why it’s pushing property values up so much, but I was fascinated to read a great report from Cotality head of research, Eliza Owen, on the issue.

Eliza reminds us of the target National Cabinet announced in August 2023 to build 1.2 million new homes in five years. It was an announcement that was met with a lot of scepticism as the problem with any government target for new dwellings is that the government can’t influence many of the factors that determine demand and supply.

While state and local governments focus on approvals and improving the feasibility of new projects, building companies continue to be stretched thin across an already swollen pipeline and reducing margins.

The closest Australia came to 1.2 million dwelling completions over five years was at the end of 2019 - under very different market conditions:

• The cash rate averaged just 1.6 per cent, compared to 4.18 per cent since July 2024.

• Units made up 46 per cent of approvals in the five years to 2019, versus just 37 per cent in the past five years, making dwelling completion more scalable.

• Investor demand was stronger, supporting off-the-plan apartment pre-sales. ABS data shows investors peaked at 44.8 per cent of new housing finance nationally in the June quarter of 2015, and 55 per cent in NSW.

• Foreign investment in new residential properties was higher, with NAB reporting foreign buyer purchasers of new homes holding above 10 per cent through much of the 2010s.

But Eliza points out that despite that building boom, home ownership rates fell, apartment value growth was poor and the level of defects in these homes was high.

Over the last few years, lending is more prudent, build quality is better, and new apartments are larger and geared towards owner-occupiers.

To move the dial on the numbers, state and local governments have enacted changes to speed up planning and approval processes and increase new home purchases.

Despite these changes, dwelling approvals have generally remained very low. Why?

Eliza believes it is in part because of relatively high interest rates, affordability constraints, and new purchases being brought forward under the HomeBuilder Scheme (which was overlaid with other incentives such as the then recently introduced First Home Guarantee).

Buyers may also be lacking confidence in new builds following a surge in construction costs between 2021 and 2023. Total dwellings approved averaged 15,611 per month over the year to June, down from the decade average of 16,770, and well below the average 20,000 needed for 1.2 million homes in five years.

State and local governments can influence dwelling approvals, but interest rates are an extremely important factor as to whether there is market demand for new housing and whether developers will seek approval for new projects. Unit approvals are averaging about 7,000 a month, but this is well below the 13,000 peak found through the more favourable market conditions of the 2010s.

Eliza is hopeful that building approvals could move higher in the coming months, as recent zoning reforms and incentives for new builds at the state level coincide with falling interest rates. But this could present a problem for the construction industry: it may add more new projects to an already swollen pipeline. It’s like turning up the tap on a bath that is already full.

Building activity data from the ABS shows there were just over 219,000 dwellings under construction in the March quarter of 2025, and a further 30,000 dwellings that have been approved, but have not yet commenced construction.

Effectively, dwellings are being approved but getting ‘stuck’ in the commencement and construction phase.

With completion times already above average, and construction costs elevated, Eliza believes it’s an odd time to be incentivising more dwelling approvals and commencements to the backlog of work to be done. In fact, without increasing the capacity or productivity within the construction sector to take on this additional work, it could even present an upside risk to inflation, at a time when the industry is crying out for rates to move lower.

Productivity in the building industry is being questioned with the Productivity Commission estimating a 12 per cent decline over the last 30 years. Making homes faster and cheaper to build, while still maintaining quality, resilient homes is the key challenge for policymakers to focus on right now.

Winding back negative gearing and capital gains tax concessions for residential property, implementing broad-based land taxes or including the family home in the pension asset test are all examples of policies that could reduce demand for housing, and potentially the need for as much new supply altogether.

This would have the added benefit of easing capacity in new home construction, rather than risking more inflationary pressures for new housing construction.

All eyes now turn to the National Productivity Summit, where leaders across government, industry and unions will debate the very reforms that could reshape elements of both supply and demand.

Eliza says, if governments are serious about delivering 1.2 million homes, they must focus on building capacity, lifting productivity, and ensuring every approved home actually gets built.

Identifying and fighting financial abuse

Financial abuse is a powerful and dangerous form of intimidation which is a lot more common in Australia than you think.

A recent report from the Tax Ombudsman has highlighted the devastating impact of financial abuse. It found one in six women and one in 13 men have experienced financial abuse by an intimate partner, with the tax system often weaponised to create debts in the victim’s name.

What makes financial abuse even more insidious is that the abuser often justifies their actions as caring. But the bottom line is that financial abuse can leave you extraordinarily exposed.

This sort of abuse often takes the form of a partner in a relationship, or a parent over a child, or an adult child over an elderly parent where the abuser completely controls the finances of the other person and refuses to share any of that responsibility or information.

Financial abuse could be:

• Having sole access to bank and online accounts.

• Controlling PIN codes.

• Taking out joint loans without a partner’s consent.

• Making one partner liable for debts they did not incur.

• Restricting access to insurance, superannuation and estate planning documents.

• Limiting access to cash and credit cards.

• Making investment decisions without consultation.

• Asking you to sign financial documents without explaining what they are.

The quick test

I’m not talking about where a couple has agreed that one partner takes primary responsibility for running the finances but is always happy to keep the other partner informed.

A financial abuser is a partner who has insisted on controlling the finances, is secretive about what they’re doing and will not share information.

To test which sort of partner you have, simply ask for them to explain the state of your finances, provide access to all accounts and know where insurance and investment documents are kept.

If they refuse, you need to worry.

If they say, “You don’t need to worry about it, I have it all under control”. You should worry. Explain that you’re concerned if they drop dead you’d have no idea where anything was and that is just too risky and you’re feeling vulnerable.

If they refuse after that, you’re in real strife and must do something about it. Your partner either has something to hide or they have such a controlling personality it will put you at risk in the future.

What if your partner does die … or leaves you?

We had friends where the husband left the wife with the comment, “you be nice to me or you won’t get a cent”. They owned a family business but she had no idea where they banked, what they earned, investments, insurances, estate planning … nothing.

We put a team of professionals together to help her and she ended up okay. But she should never have been in that position.

Sexually Transmitted Debt is just one of many risks. It’s where one partner in a relationship is lumbered with the debts of the other. You’d be amazed just how common this problem is.

One partner will rack up debts on the joint credit card, refuse to pay or skip out and the other partner is left with the responsibility of paying the whole debt. Joint cards or loans don’t mean you’re responsible for your half. It means both people are responsible for the whole debt if the other can’t pay.

How to protect yourself from financial abuse 

Here are some steps to take to keep yourself financially safe from abuse:

• Base financial decisions on economics, not emotions. If you trust each other then there is no problem with formalising that trust by keeping each other informed about financial decisions.

• Don't dismiss it. Read it. When you have to sign papers it is better to be one day late than to lose everything in five year’s time just because you were too busy to read the small print.

• Going guarantor: If the bank does not have confidence in the principal applicant, why should you? Remember, when you sign as guarantor, you are indicating you are prepared to take over the debt if the borrower defaults.

• Know where the money is coming from and where it is going.

• If you have a joint account with your spouse, make sure the bank does not allow transactions above a certain amount to be paid unless there is a joint agreement.

• Look carefully at how you buy assets … single names, joint names, their name, your name? It could all be extremely relevant for both tax purposes and if the relationship splits.

• If you are a director of a family company you have a right to see the books. Insist on the accountant showing them to you. If you’re stopped from doing so, you can take action under the Companies Code.

• Agree on a financial plan. This way both partners have common goals and know where they are heading.

In our relationship, Libby has always run the day-to-day finances and I look after the investments. But each of us has full access to everything and we make big financial decisions jointly.

Property listings down ahead of Spring Selling Season

It’s that time of year when home owners looking to sell their property are busily preparing them for the Spring Selling Season.

According to SQM Research’s national residential figures, listings fell 3 per cent in July and 1.8 per cent over the year - and both were down at this time last year.

While some cities show renewed activity, overall volumes suggest sellers may be waiting for improved conditions as the spring market approaches. A few cuts in interest rates will certainly move things along and change sentiment.

Sydney and Adelaide were among the few capitals to register annual increases, up 4.5 per cent and 6.5 per cent, respectively. This is despite monthly declines of 2.3 per cent and 1.6 per cent. Perth posted the most significant yearly rise, up 17.0 per cent, even as monthly volumes contracted by 9.3 per cent. This suggests its booming property values are attracting sellers who want to bank their capital gain.

Conversely, Melbourne and Brisbane experienced both monthly and yearly declines, with Melbourne falling 3.3 per cent in July and 4.2 per cent year-on-year. Brisbane dipped 1.6 per cent month-on-month and 7.8 per cent annually, pointing to softening supply in Queensland’s capital.

Darwin saw the largest annual fall, down 36.7 per cent, with total listings now below 1,000. Hobart and Canberra posted moderate yearly increases of 1.4 per cent and 6.9 per cent, respectively, though both recorded monthly declines.