Who took the interest rate carrot away? + 12 ways to save this Christmas

Hi everyone,

Hope you’re enjoying the start of summer and coping with the Christmas party and shopping season.

A bit of a rollercoaster for the economy this week and the sentiment around interest rates, so let’s get straight into it.

In this week’s newsletter:

• The RBA hints at an imminent interest rate cut … but stronger employment numbers could put it on hold.

• A reminder of how to negotiate your own rate cut.

• A fascinating insight into Australia’s population growth.

• Why property buyers are focussing on the value end of the market.

• Superannuation returns bounce back in November.

• How to get on top of ‘life admin’ over the summer break.

• Tips for reducing the financial pain of Christmas.

• How much the performance of the Australian sharemarket is lagging the US.

• The sheer size of Australia’s natural resources.

RBA starts hinting on an interest rate cut

As expected the Reserve Bank kept official interest rates on hold at their board meeting earlier this week, but - and this is important - their language changed to indicate the next move in rates will be down.

Remember over the last couple of months they’ve been hedging their bets and saying they’d look at the economic data before making a decision on which way rates would go, and, “The board is not ruling anything in or out” ... inferring they could still go up?

In this week’s announcement accompanying the decision it was noted, “The Board is gaining some confidence that inflation is moving sustainably towards target.” - thus indicating the next rate move will be down. That is a significant change in sentiment.

The Board also said, “While underlying inflation is still high, other recent data on economic activity have been mixed, but on balance softer than expected in November.”

A consistent concern of the RBA has been the tight labour market feeding into higher wages, which then fuels inflation. The statement claimed, “Wage pressures have eased more than expected in the November SMP.”

Financial markets were very happy with the RBA statements - inflation moderating, the economy slowing more than expected, the labour market softening and easing wage pressures.

But then yesterday’s stronger-than-expected unemployment figures came out … and that chance of a February rate cut dropped to below 50 per cent.

Governments’ hiring and spending spree will delay rate cuts

The November unemployment rate dropped to 3.9 per cent, the lowest since March and back to the level of this time last year. Australia has the third lowest unemployment rate of the G20 biggest economies, behind Japan and South Korea.

And the unemployment rate is now well below what the RBA has been forecasting (hoping) for.

Over 35,000 new jobs were created in November which was way above expectations. A phenomenal 393,900 jobs have been created so far this year.

This is not a weakening labour market. This is still a red-hot market. And that is not what the RBA wants.

The ACT had the lowest jobless rate in November at just 2.9 per cent, reflecting the massive hiring spree by governments. Western Australia’s jobless rate dipped to just 3.3 per cent with 15,300 jobs created last month. Queensland, New South Wales, Tasmania, South Australia, and the Northern Territory each had jobless rates of 3.9 per cent. Victoria had the highest unemployment rate of 4.2 per cent.

So where on earth are all these jobs coming from?

You guessed it ... governments. Look at this surge in Government employment (the green line) since the pandemic. Crazy.

As you know, this has been my hobby horse for months. Governments are spending record amounts of money, hiring record numbers of workers and fuelling inflation by creating a tight labour market. This pushes up wages which, in turn, pushes up prices and inflation.

It’s pretty simple. Australian households and businesses are staggering under the cost-of-living crisis and desperately hanging out for an interest rate cut. But the cut keeps getting delayed because governments are spending too much.

At the start of the week, a rate cut was on the horizon. By the end of the week, it is further away because governments are working against the Reserve Bank, rather than with it, to fight inflation.

Don’t wait for an RBA cut ... negotiate your own

If higher interest rates are really hurting, don’t wait for the RBA to come to the rescue. As I always say, be proactive yourself and renegotiate a better rate with your lender. Make sure you currently have the best deal. If not, then refinance.

But there are three steps to take before attempting a negotiation with a lender:

1. Arm yourself with information. You should know your lender’s lowest advertised rate.

2. Shop around and compare what other offers are available. You might find even cheaper rates or enticing incentives like cashbacks.

3. Use a calculator to work out what you could be saving. Knowing the money you could be clawing back is great motivation.

You should feel empowered to negotiate. The worst thing that can happen is that your bank will tell you “no” and then you’re free to move on to a different lender.

Refinancing can potentially save you thousands of dollars over the life of your loan. But look out for:

• Fees - Ask the new lender to waive upfront fees.

• Break costs - If you refinance from a fixed-rate loan before the fixed term is up, you could incur significant break costs.

• Cashback deals - The allure of cold, hard cash can be tempting, but you should also consider the interest rate being offered.

• An ugly revert rate - Fixed-rate loans usually revert to a standard variable interest rate after a pre-determined amount of time. This is often much higher than the market average variable rate.

A fascinating insight into Australia’s population

Okay, I admit, I can be overly fixated on the make-up of the Australian population. We have to continue to grow as an economy because that means our lifestyle can be maintained. That’s why immigration is so important.

We don’t want to be like Japan, China and many other countries which are stagnating because of an ageing population and decreasing population growth.

Have a look at this set of charts produced by IFM Investors. A few things which stand out for me are:

• Our population is growing almost five times faster than other advanced economies.

• The average age of our population is going down rather than increasing.

• Thanks to immigration our birth rate is at all-time lows.

• While NSW receives a high proportion of overseas migrants, it is seeing a lot of its residents move interstate for a better lifestyle and cheaper housing.

Property buyers focus on the affordable end of the market

As the ‘spring selling season‘ winds down, it is interesting to see how the cost of living pressures are playing out in the changing preferences of property buyers.

Property research group, CoreLogic, this week released its Best of the Best Report for 2024. It found a trend toward faster growth in more affordable markets was reflected across all capital cities in 2024.

The top growth house markets were all located in Perth, and half of the suburbs had a median house value below $661,000, which is the 25th percentile (bottom quarter) of house values nationally. The top growth unit markets were located across Perth, Brisbane and Adelaide, and each of the top 10 had a median unit value below $600,000.

Superannuation returns bounce back in November

Superannuation returns bounced back in November. This followed on from a flat October - led by the strong performance of international shares, particularly in the US, following the outcome of the US presidential election.

Superannuation research house, SuperRatings, estimates that the median balanced option returned 2.4 per cent in November. The median growth option grew by an estimated 2.8 per cent, while the median capital stable option, with limited exposure to international shares, grew a more modest 1.4 per cent.

The estimated monthly returns pushes the calendar year return into double digits, with the median balanced accumulation product estimated to return 11.4 per cent for the first 11 months of 2024. For pension members, the median balanced pension product is estimated to return 12.8 per cent.

How to get on top of your life admin over summer

Life admin - those seemingly small but never-ending tasks like paying your bills, lodging tax returns and sorting out household paperwork - can creep up on you until you’re positively drowning in stress. It’s no surprise that a recent survey revealed that millennials are the most stressed-out generation, with 75 per cent saying life admin is one of the biggest stressors.

But I reckon this rings true for people of all ages, not just millennials. In fact, the data shows that two in five (40 per cent) of Gen Z-ers and more than a quarter (26.4 per cent) of Gen X-ers admit they are too time-poor to deal with life admin.

The good news? The Christmas break is the perfect chance to tackle your life admin and set yourself up for a more organised 2025. Here’s how:

Start with a clear plan

Arguably the biggest hurdle with life admin is knowing where to get started. When you’re trying to wade through a dozen overdue tasks, it’s easy to get overwhelmed and stick your head in the sand. But avoiding it will only make things worse.

So, start by making a list of what needs to get done, whether that’s paying bills, renewing your insurance policies or just clearing out your inbox. Then, prioritise! What’s urgent? What can wait? By breaking everything down into smaller, more manageable pieces, you’ll feel more in control.

Here’s a tip: ditch the to-do list and block out time in your calendar instead. Scheduling 30 minutes or an hour for a set task means it’s less likely to fall by the wayside.

Make the most of technology

We’re living in a digital age, so why not use technology to make your life admin easier? Set up automatic payments for bills so you never miss a due date. Most banking apps will let you lock in spending limits or set up alerts to keep your finances in check.

And when it comes to tax time, create a digital folder to store your receipts and important paperwork throughout the year. Snap a photo of paper receipts - yes, they fade over time - and keep them organised. As I’ve said before, there’s no “Ctrl+F” for a shoebox full of receipts!

Comparison websites are another lifesaver. Whether it’s energy bills, insurance or internet plans, they can help you find better deals in minutes. Sure, shopping around might sound tedious, but the savings can run into the hundreds - if not thousands - of dollars.

Stop letting life admin cost you

Nearly a third of Australians let their insurance auto-renew just to avoid the hassle of shopping around. But here’s the thing: auto-renewing could be costing you a fortune. Insurers love ‘customer inertia’ to sneak in price hikes.

Similarly, 32 per cent of people say they’re just too time-poor to deal with their bills, and 14 per cent even get someone else to handle them entirely. While delegating is fine, ignoring life admin altogether could mean you end up missing payments or have to pay late fees.

Delegate or outsource

If your life admin list is at the point of being just way too overwhelming, it might be time to call in the reinforcements. Hiring a professional - like a financial advisor to help with budgeting or a tax agent to handle your returns - can be a real game-changer. Sure, there’s a cost involved, but the time and peace of mind you’ll get in return could be well worth it.

You can also try delegating smaller jobs to family members or friends. Sharing the load makes a world of difference.

Turn good habits into a routine

Here are a few ways to make life admin less of a chore:

1. Start with a clear out: Unsubscribe from emails you never read, review your subscriptions and ditch the ones you don’t really use, and tackle any lingering tasks you’ve been putting off for far too long. From there, put systems in place -whether that’s setting up direct debits, creating a dedicated tax folder, using online comparison tools, or something else entirely.

2. Set up a system: Use folders (physical or digital) for your most important documents. Set reminders for recurring tasks and create a designated space for bills or paperwork.

3. Block out some weekly ‘admin time’: Set aside at least 30 minutes every Saturday or Sunday for staying on top of your life admin. It’s a small commitment that will stop tasks from piling up.

Life admin really doesn’t have to be something overwhelming that’s always in the back of your mind. With a bit of organisation and the right tools at hand, I think anyone can take back control and set themselves up for a less stressful 2025.

How to minimise the cost of Christmas

It’s meant to be the season of joy, but for many, Christmas can become a financial nightmare. It’s a time when spending can easily get out of control, and those purchases made in November and December can really bite with the arrival of the credit card bill in the New Year.

For many, not having the financial resources to celebrate Christmas in the manner they would like to, or feel they should, can cause so much stress that it destroys the whole meaning of Christmas.

In so many cases, people forget the true meaning of Christmas. They believe they have to spend a lot of money (which they may not have) to keep up a certain image or expectation of the ‘perfect Christmas’ for their family and friends.

Apart from the gifts, there are all the other expenses like food, wine and decorations. Christmas is now just so expensive, but it doesn’t have to be. The key is to be well organised and, above all, realistic. Don’t let Christmas get out of hand.

Nearly a third of Australians will take on credit card debt, 8 per cent will use ‘buy now pay later’ services and 1 per cent will take out a personal loan to pay for Christmas presents this year. Plus almost half of all Australians will dip into their savings account to pay for Christmas.

So how do we ease the cost of Christmas? Here are some ways:

12 tips for surviving Christmas financially

1. Gifts which don’t cost. Be creative in your gift-giving. Many parents with younger children will appreciate your gift to babysit while they spend time alone. Do you like dogs and cats? A gift certificate to a pet owner for walking or grooming will be appreciated. The value of the time you are able to give people far outweighs a costly gift which is quickly forgotten.

2. Make a list. Avoid a stressful and expensive supermarket scrum by planning ahead. Make a list and try to buy non-perishable items on a normal shopping trip in advance.

3. Be a sneaky shopper. If you don’t catch up with family until after Christmas, do all your shopping at the Boxing Day and New Year sales. You’ll save a bundle, not only on gifts but also the table decorations.

4. Follow Libby’s military operation. I am married to an amazing Christmas shopper. By the end of October, Libby has completed most of the gift shopping. She compiles a list of all the relatives and then puts them into ‘gift buying batches’. For example, ‘teenage nephews’, ‘young nieces’, ‘brothers’, ‘sisters’ and so on. Then she buys the family members in each category the same present. She buys in bulk and starts her purchases from the middle of the year when she sees a bargain.

5. Shop online. If you can’t afford the time to shop around and compare prices, do it online. It saves time and the maddening Christmas melee around the cash register. But don’t get stung by delivery fees. Online shopping has made it easier than ever to do the Christmas shop, but you may need to spend a certain amount for free delivery. Ensure you understand what fees apply. Click and Collect is usually free.

6. Early-bird stocking fillers. I shop for the small stocking fillers ahead of time -even as early as the January sales. But I stick them away in a dark cupboard so the kids can't find them! Or I make homemade Christmas treats such as white Christmas rum balls to shove in the stocking, or as a nice present on its own.

7. Stock up on luxury cards. There is nothing lovelier than receiving a nice Christmas card. The only problem is they can be expensive and if you have a lot of friends, this cost can mount up. Buy discounted premium Christmas cards just after Christmas for the following year.

8. Use reward cards effectively. If you plan on using reward cards, ensure you ‘boost’ within the apps to maximise the points you can earn. Also ensure you can use any points accrued throughout the year on your Christmas shop. Australian households with an insurance policy or mobile plan with Woolworths can receive a 10 per cent discount on one shop per month. Utilise this saving for your big Christmas shop and you could spend less without breaking the bank.

9. Ask for a price match. Many stores offer price matching or price beating, so this could help stretch your dollar and save you travelling to multiple stores.

10. Use a debit card rather than a credit card. Most banks offer debit cards, which can be used in the same way as credit cards except you’re using your own money in your own account, rather than someone else’s and paying an exorbitant interest rate for the privilege.

11. Give a charity gift. A lot of charities like World Vision and Oxfam offer gift vouchers at Christmas where you can buy things like a chook, water hole or birthing kit for someone in need, in the name of your friend or relative. It really is the heart of the Christmas spirit … and is tax-deductible to you.

12. Earn extra cash to cover Christmas expenses. The lead-up to Christmas can be a great time to turn that hobby into a money spinner. If you love knitting, craft, cooking or whatever, start a stall at the local markets or sell online to earn a little extra Christmas cash.

Why share investors have needed exposure to US shares

Yet another reminder of the incredible performance of the US sharemarket and the Canadian market, which is the TSX Comp (stands for Toronto Stock Exchange Index) …

The Nasdaq is up an incredible 40 per cent since last December as it is heavily weighted to the big technology stocks, which include the so-called Magnificent 7. The broader S&P 500 Index is up 34 per cent in value and Canada’s TSX has added 27 per cent.

You’d think the Canadian sharemarket would mirror the performance of the Australian market as it too is dominated by major resource stocks.

The facts are the All Ordinaries index is up 10 per cent so far in 2024 and up 12 per cent since December last year. That’s less than half the return of the Canadian market and a lot less than the Nasdaq and S&P 500.

The world’s richest resource nations

Speaking of natural resources, I reckon this chart shows how lucky Australia is. We rank eighth in the world for the value of the natural resources we have.

I often talk about how Australia’s exports are dominated by coal, iron ore and a range of other commodities. They underpin our entire economy and our privileged lifestyle, compared with other countries.

As you can see in the below image, the sheer size and value of our natural resources will continue to underpin our lifestyle for generations to come.