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Super more attractive than ever: BT
The Budget’s favourable superannuation tax concessions provide a disincentive for eligible individuals to invest their money elsewhere, according to BT Financial Group chief economist Chris Caton.
In a briefing on the global economic outlook, Caton pondered why investors would consider other investment vehicles given the extremely generous tax concessions delivered by the raft of superannuation changes in the Federal Budget and the relatively low yields of direct property.
“Super is now so tax effective, why would investors bother with something else,” said Caton, citing his own experience of a residential property he purchased in 2000, which was sold in 2006 for a real market return much lower than might have been expected.
Speaking at a quarterly global economic briefing, he also referred to the continued slowing in housing construction in the US, along with falling employment figures in construction and manufacturing, as having the biggest downward impact.
He displayed a table showing that over the past three months, the US construction and manufacturing sectors have lost 100,000 jobs.
Overall though, he said “employment growth is still holding up quite well … it could weaken significantly in coming months, but has held up so far”.
Looking at consensus views on global medium-term economic growth, Australia still led most other nations with average growth of 3.2 per cent predicted over the period 2006 — 2016.
In historical tracking of the Australian currency, he said that over the last five years the link to US gross domestic product growth “seems to be less obvious”.
Despite the expected negative impact of the anticipated fall in the US economy, Caton said there has been a gradual shift in the Australian dollar relative to the US dollar.
“We seem to be able to generate our own cycles now to a greater extent than we could in the past,” he said.
Caton believes that it is unlikely the Reserve Bank of Australia will raise official interest rates in February, 2007, despite numerous predictions, “given that underlying inflation has been creeping up” and that more time is required in order to gauge the effect of earlier rate increases.
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