If you’ve been keeping up with news lately you’d hardly be surprised to notice that Australia is facing a preventable health crisis with two in three of us currently overweight or obese.  In Australia, while chronic disease is the leading cause of death and disability, these health challenges affect all sectors in Australia, including the provision of financial advice.

Given these statistics, one might assume that Australians would be working overtime to improve their health, but sadly this does not appear to be the case. Many of us, when faced with a decision about whether or not to eat a fruit salad over a sweet treat, often decide to take the short-term reward of enjoying a tasty treat, despite the long term health consequences that may result from doing so.

So, what can we do to get Australians more motivated to improve their health, particularly with the festive season fast approaching – while a significant time for Australian families to celebrate, it’s also ultimately a time that many put on weight.

AIA Australia conducted a survey of 1,300 Australians aged between 25-45 years to find out what it is that ‘turns us on’ and also prevents us from improving our health, including exercise and eating well. The research revealed that nearly 90 per cent of us wish we were more motivated to create and sustain a healthier quality of life, but that crucial willpower alone is not enough to sustain healthy habits.

Three-quarters of Australians found that rewarding themselves when reaching their fitness goals successfully motivated them to get off the couch. Eating something tasty, as a reward after a workout session, was the most popular source of exercise motivation, favoured by 40 per cent of both men and women.

Looking at the results, it is clear that Australians need to find their own personal motivational techniques to get healthier. From wanting to look good at a friend’s wedding, or being able to keep up with the grandkids, everyone has a different motivator that needs to be harnessed.

No one is immune to the health challenges Australia faces. Many private sector organisations can play a role in helping solve our soaring obesity and chronic disease rates. By tapping into what can motivate and incentivise each of us to improve our health, we can have a better chance of overcoming this crisis.  

Source: AIA, October 2014

Speak to your financial planner to discuss your health insurance options.
Call Leenane Templeton on (02) 4926 2300 or email us.

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The Australian economy remains in very good shape, both in the context of its own historical performance and when compared to other developed economies. Very few developed nations can match Australia’s combination of vital economic statistics: low unemployment (5.6%), solid credit rating (AAA rating), low government debt/GDP, low inflation (2.4%), solid economic growth rate (3.1%) and strong relationships with global economic powerhouses. We expect to see reasonably strong GDP growth in the domestic economy driven by export growth and a gradual recovery in consumer demand in 2014. Interest rates remain at historically low levels and the Reserve Bank of Australia has shown little inclination towards a tightening of monetary conditions in the short to medium term.
 

State and federal governments are expected to take advantage of the low interest rate environment to embark on a number of infrastructure projects. This, along with productivity improvements as corporates maximise operating leverage, will support employment growth stability.
 

Economy in transition
 

The stability of the Australian economy is dependent on a transition from mining capex led growth to an increase in domestic consumption. And while the transition is unlikely to be orderly, we believe all the necessary ingredients are in place for a gradual lift in the non-mining economy.
 

Australia’s prosperity is not about resources alone. The services industry continues to grow in Australia in sectors such as tourism and financial services, while manufacturing and agriculture still make a meaningful contribution to GDP as Australia embarks on niche products and value add production lines. Despite Australia having likely witnessed the peak in mining capex, bulk commodity and LNG exports are forecast to grow significantly in 2014 pushing the balance of payments into surplus. Retail sales are showing signs of improvement from a fifty year trend low with the 2013 Christmas period expected to be very strong.
 

Contributing to the improved retail outlook has been the increase in household wealth. The savings rate remains above historical averages. Combined with an average 10 per cent increase in house prices, there is a strong ‘wealth effect’ for Australian households with significant pent-up demand. The very high savings rate in Australia is likely to fall, funding an improvement in discretionary spending.
 

China is now the third largest source of inbound tourists to Australia and increasingly a significant investor in the Australian housing and commercial property market. The falling Australian dollar will see this trend strengthen and also encourage domestic travellers to holiday within Australia. A substitution of domestic for international tourism will also provide a fillip for the non-mining economy.
 

Australian equities for income
 

After a strong 2013, we are still positive on the outlook for Australian equities in 2014. We believe the market is still attractively valued given a price-to-earnings ratio of 14.7x which is around the historical average. The dividend yield of the market also remains highly attractive versus other asset classes with a gross franked yield of 6.2 per cent, significantly better than cash (2.6 per cent) and bonds (4.3 per cent). We expect to see continued improvement in market earnings revisions and growth as indicators for world economic growth are strong into 2014 and the domestic benefits of lower interest rates and Australian dollar flow from house prices to construction to broader domestic activity. We view the tapering of quantitative easing as confirmation of a lower macro risk environment which will see higher returns from higher beta, or more cyclical stocks, that have not been rewarded in the last few years of high uncertainty, especially in Australia. Australian equities as a global source of income wwill remain a very strong theme. Income will be a large percentage of total return in 2014 with high quality companies with minimal income risk a key focus for the income portfolios.
 

If you would like to discuss the market further or any other investment and financial planning matters, please do not hesitate to contact our professional and award winning team.
 

Source: Legg Mason, February 2014
 

Disclaimer
 

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China’s growth is expected to slow to 7.5% this year; the offi cial government target in its 2011-2015 fi ve-year plan is for an average growth rate of 7.0% per annum. Growth is slowing partly because Europe’s recession has crimped exports but also because China’s central bank is deliberately seeking to tighten credit conditions to stop speculative investment into property and other assets.

China launched a credit-fueled investment boom in 2008/09 in response to the Global Financial Crisis (GFC), which saw total debt rise from 160% of GDP to 210% of GDP according to official figures. While these debt levels are manageable, there is a lingering concern that more debt has been accumulated in the ‘shadow banking system’ and that property speculation is continuing. Accordingly, the central bank recently moved to tighten credit conditions more aggressively with a particular focus on non-bank fi nancial intermediaries.

Even if growth slows to 7.0%, this is still a significant growth rate considering China’s annual GDP is now over US$8.2 trillion, ranking it as the second largest economy in the world (after the US at nearly US$16 trillion and excluding Europe as a region rather than a country).

However, China’s growth is likely to be less investment-intensive in the future given investment has grown to over 50% of the economy and China’s new leaders aim to rebalance the economy towards consumption.

A slowdown in investment will obviously reduce demand for steel and other building materials, which will impact many commodities like iron ore, coal, copper and alumina – all of which are key exports of Australia. At the same time that China’s demand for commodities is slowing, global supply is set to increase, so it is likely that commodity prices will continue to weaken and that Australia’s export income will be under pressure.

The rebalancing of China’s economy is important for its long term stability and it will remain an important market for Australia; however it is likely that we have seen the end of the global mining boom. We see a long period of lower commodity prices and reduced mining activity ahead.

A slowdown in mining will obviously be a drag on Australian growth, particularly in the mining states of Western Australia and Queensland, but surely lower interest rates and a falling AUD will offset the mining slowdown?

In the past, the answer would be a resounding yes, but this time other sectors of the economy – such as retail, housing construction and business investment – are only showing modest signs of recovery. Lonsec believes there are a number of reasons for this including:

1 Attitudes to debt have changed post GFC, with companies, households and government all seeking to increase savings and reduce debt levels.

2 Low business confi dence on poor profi t growth and burdensome government policy has led to a focus on productivity measures rather than investment.

3 Job insecurity stemming from business and government reducing employees, in a number of sectors, has led to cautious consumer behavior.

These factors are not going to change overnight but falling interest rates, a falling currency and a clear Federal election result should eventually see the broader economy rebound. Accordingly, we expect the Australian share market to retain an upward trend but recommend investors tilt their portfolios towards financials and industrials.

William Keenan – General Manager Equities Research – Lonsec

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