Murray Enquiry in the Australian Financial System: what does it mean for you

Posted: October 21, 2015 in Uncategorized

The Government accepted all recommendations of the Murray inquiry, apart one.

It will be a “go slow” approach and possibly interrupted by an election – but it is interesting to see the direction of their thinking.

Moreover it has been lauded by all sector…which means it is quite soft as no major interest have been disrupted …and everything was already agreed upon.

Let’s look at the summary from the government own statement

  • Resilience

The government says that the will be no “bank bailout” in the next Financial Crisis and banks have to shore up their balance sheets as they source their money from abroad,

This was well in the cards as you can see from the various capital rising of the banks and even increase of interest rates from Westpac.

Two main takeouts:  the interest rates have pretty much bottomed. This would put further pressure on housing and also in the stock market the bank share price will not go anywhere (80% of the bank profit comes from the loans)

-Super/Retirement income

This address an issue that is in my mind from quite a while. There are too many pensioners that take a lump sum at 60 to “live the life” until 65…and then rely on the age pension. The Government need to change that as it is not sustainable so in the future you WILL NOT able to get lump sums (or probably it will be a limit in what you can take) as your money will be compelled to invested in retirement income product.

This has the potential to have a huge impact on your planned lifestyle. Maybe putting all your money into super is not anymore the smartest idea.

The other huge factor is that the Government is thinking about changing the default allocation on your super. Currently practically is 70% Growth and 30% Income. This means that every year a huge amount of new money goes in Australian shares. A switch of this to a more balance 50-50, could be a massive game changer in the market with more focus on the corporate bond market

-Innovation

Linked to the above point the Government highlight the need of corporate bond and social/infrastructure bond

A very good outcome is the will of bringing some rule around the Credit card space….a really theft by stealth space.

-Consumer outcome

A minimum standard education for financial advisers

Accountability of issuer

A further look in conflicting remuneration also in mortgage broker and stock broker space

Regulation

More power for ASIC, which will also powers overlapping the competition watchdog.

Interestingly there will be a commission that oversees ASIC/APRA. This is again important as the recent scandals showed as the big banks have been treated with white gloves.

Nothing against ASIC, but it is much easier and cheaper to target a John Doe that has access to a normal lawyer than go against a mega bank with an array of mega lawyers

The clause that has not been accepted is the one in relation to the use of loan in the SMSF (specially in regards to buy property)

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