Posts Categorised: Uncategorised
The importance of super contribution limits
For my clients who are still working, one of the most discussed topics is how much to put into superannuation each year. Without even thinking I always say “the idea is to target the maximum which in your case is $X”. While stating this limit does not actually help to make the cash-flow that is needed available, it does set a very clear goal. A softer approach is to recommend they contribute “as much as possible” though this is much less encouraging, because as the financial year rolls on, money is spent on other things and super contributions become a lesser priority. The other extreme of not putting in enough, is putting in too much, which can cause problems, though the superannuation system does allow avenues for genuine errors to be rectified without too much hassle. But it is...
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Basic economic theory – interest rates
The theoretical interest rate story goes something like this… Lower interest rates encourage additional investment spending, which gives the economy a boost in times of slow economic growth. In Australia, the RBA is responsible for Australia’s monetary policy, which involves setting the interest rate on overnight loans in the money market (‘the cash rate’). The cash rate influences other interest rates in the economy, affecting the behaviour of borrowers and lenders, economic activity and ultimately the rate of inflation. Changes in interest rates affect the public’s demand for goods and services and, thus, aggregate investment spending. A decrease in interest rates lowers the cost of borrowing, which encourages businesses to increase investment spending. Lower interest rates also give banks more incentive to lend to businesses and households, allowing them to spend more. Over the last couple of weeks I have had client situations that have both proven and disproven the...
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