It's time to educate
Published in the Geelong Advertiser, February 2010
by Dale Gillham
An alarming situation is unfolding for ordinary Australians, given as a nation we currently face a retirement savings shortfall of around $700 billion.
In order to lessen the future financial burden of an ageing population, the government has been looking at ways to close this gap.
If left unchecked, this savings shortfall will cause a considerable draw on resources via the pension and healthcare services, and in doing so will affect the quality of life for many Australians.
Statistical analysis indicates that the over 65s will represent around 30 per cent of the population by 2051.
So what is the solution?
Suggestions are that business might wear the cost if the government introduces an increase to the super guarantee from 9 per cent to as much as 12 per cent.
Given that small business is the largest employer in Australia, the flow on effects of such a change could put many companies at risk and have a negative impact on
unemployment.
Alternatively, employees could cut their take home wages by forced savings into super, although this might be difficult given many people tend to spend more time planning a holiday than their retirement, or live from pay cheque to pay cheque, spending everything they earn.
I believe people need to be responsible for themselves rather than relying on the government to fix things, however, I also believe the government would be better off by simply educating our children in what I would call essential money management skills.
So what can we expect in the market?
Following the high of 4984 in January 2010, the All Ordinaries index has experienced a decline over a period of 18 days, which is the longest fall in time on the market since July last year where it fell for 18 days.
Generally, when moving into a yearly low we like to see a decline in the order of 7 to 10 per cent, and as of today the market has fallen by around 9 per cent, therefore the signs are increasing that we are heading into our yearly low earlier than expected.
Given this, you may be wondering whether now is a good time to consider buying stocks. My view remains unchanged, in that provided the market turns in the next few days to trade up and break through the 4800 point level then we will see another strong rise.
However, if the alternative scenario unfolds expect a further decline into a low at around 4300 points. Either way, I believe our market will rise up into mid 2010 to my target level, and therefore the current move down will simply give us opportunity to get some good shares at lower prices.