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  • All Ords Report 07 Sep 2016

All Ords Report 07 September 2016

Why aren’t more Australians financially well? And, what’s the solution?

Research by CoreData on behalf of Workplace Super Specialists Australia (WSSA), found that for every five Australian workers, two are in desperate need of improving their financial wellbeing and only 26 per cent have "financial wellness". So where do you fit in?

As much as 39 per cent are considered as being “financially unwell” or “needing room for improvement”. I find this data alarming given that as a nation we pride ourselves as “the lucky country”. So why aren’t more of us experiencing “financial wellness”?

The research found that more than half of those who are considered to be ‘financially unwell’ had poor financial literacy.

Our politicians talk about the importance of education and training, and a lot of money in government budgets is directed towards this area every year. But given the research findings, is enough money going into the right areas to help people to build their knowledge so they can be financially well?

One idea to come out of the research is to help people to develop financial literacy through financial advisors. While financial advisors may improve some people’s financial wellness, advisors are not educators, they provide a service, being financial advice. So people become more dependent on financial advice rather than financially literate, which surely is the goal.

As part of becoming more financially literate, learn how to buy and sell shares safely.

Further, a report by EY Sweeney on behalf of the Australian Securities and Investments Commission (ASIC) looked at some of the key financial attitudes and behaviours in Australia and found that around three in five Australians are confident about managing their money.

If so many Australians were really confident about managing their money why are so many “financially unwell”? It’s one thing to say that you are confident, it’s another to actually demonstrate competency. After all, you don’t know what you don’t know.

Isn’t managing money also about being able to invest well for your future? If not, what is the point of being able to manage money coming in and going out. Who wants to just get by? We already know there’s a big gap in the ability of Australians to build wealth for retirement, with so many still retiring on a government pension.

What do we expect in the market?

The Australian market slipped below 5600 points this week as the excitement of reporting season wore off. The Australian market was trading at around 5485 points at the time of writing.

Attention has turned to oil and the US Federal Reserve again this week while tension builds about the pending US election. The market is waiting for some definitive news on a Russian/Saudi agreement to stabilise oil prices, however, it has been reported that the National Iranian Oil Co (NIOC) has no plans to cut or stop oil production, so what can you believe? Given this, we are likely to see further volatility in the oil price. A move back above US$48.75 (NYMEX crude) would be a very good sign.

The Reserve Bank of Australia (RBA) has confirmed that the cash rate will remain on hold, so no surprises there.

The Aussie dollar was trading above $0.76 at the time of writing. Resistance at around $0.77 is proving strong, however a break through this level and the AUD would shoot higher. A fall below $0.75 would see a decline to around $0.735.

All of that aside, the market is moving as our analysis indicated it would and now needs to pull back to build support for the next rise. We could see the Australian market trade down slightly lower to around 5400 points over the coming weeks, which is around the level it peaked at in October 2015. For a further rise to unfold the market must break strongly above 5640 points. So, right now patience is key while we await the turn back up.

Across the board, the overall earnings for Australian companies were weighed down by a loss of US$6.4 billion posted by BHP Billiton. Interestingly, BHP’s share price was rising prior to the result. This season we have seen lower analyst expectations, tighter agreement about results, and overall corporate profits were viewed as relatively stable.

The view of the economy at the moment is also about stability. While retail sales may not be as strong as some analysts would like to see, consumer confidence is much more positive. As mentioned in a previous report, keep looking for the signs.

Dale Gillham is Chief Analyst at Wealth Within

All Ords Chart 06 September 2016

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