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Peter Switzer
+ About Peter Switzer

About Peter Switzer

Peter Switzer is one of Australia’s leading business and financial commentators, launching his own business 20 years ago. The Switzer Group has since grown into three successful companies spanning media and publishing, financial services and business coaching.

Peter is an award-winning broadcaster, twice runner-up for the Best Current Affairs Commentator award for radio, behind broadcaster Alan Jones. A former lecturer in economics at the University of NSW, Peter is currently:

• weekly columnist for Yahoo!7 Finance
• a regular contributor to The Australian newspaper and ABC radio
• host of his own TV show, Switzer and Grow Your Business, on SKY News Business
• regular host of the Super Show on 2GB radio.


Dear Peter, What fun! You are really very good at what you do. I appreciated our time together and wish you continued success in all you do. Have fun (I know you will).

Jack Welch, former CEO, GE, and ‘Manager of the Century’ (Fortune magazine)

Peter, It was great to have worked with you – you really made the event come alive. I hope you enjoyed yourself. I know Steve Ballmer [CEO, Microsoft Corporation] did.

John Galligan, Director of Corporate Affairs & Citizenship, Microsoft Australia

Here’s a home truth, my only real education – or teacher who I actually ever listen to – is your interviews on Qantas. So thank you with sincere respect.

Sean Ashby, Co-Founder, AussieBum

Peter did a wonderful job on the night; keeping the program moving, working around changes to the run sheet, and ensuring each award recipient, and our sponsors, were made to feel welcome and important.
The feedback received from those attending has all been extremely positive.

Peter Mace, General Manager NSW, Australian Institute of Export

Peter, We would like to congratulate you for performing your master of ceremonies role in such a professional, entertaining and informative manner. We were impressed by your ability to tease out each winner’s story so that the audience gained maximum benefit from their collective business experiences.

Greg Evans and Nicolle Flint, Directors, Australian Chamber of Commerce and Industry

Hi Peter, I listened to you speak this morning and thought you were amazing. I am an accountant and in risk management and have never thought about doing a SWOT on myself – thanks for the tip!

Serife Ibrahim, Stockland Corporation Ltd

Dear Peter, Thank you for your valuable contribution to this year’s forum. Ninety-two per cent of delegates rated your presentation highly, commenting on its useful and topical content.

Catherine Batch, Head of Marketing and Communications, Indue

Peter has facilitated our CEO and CFO symposiums over the last three years. A true professional, he takes away the stresses of hosting and organising an event.

Justine Goss, Strategy Group

Are rich people tax bludgers? Here’s one for the rich people haters!

Thursday, October 19, 2017

By Peter Switzer
A potential big story today is former Labor Treasurer, Wayne Swan ripping into BHP as our worst tax dodger. Of course, he did his ripping in Parliament where you can slag anyone without legal retribution but the whole story made me think about whether rich people are as bad — tax dodging wise — as we think?

I’m not going to argue that rich people don’t work hard to find experts to minimize their tax but the statistics still say richer Aussies do pay a lot of tax compared to the less wealthy finger pointers.

Where do I get my info from? What right-wing think tank designed to cover up the truth about tax paid by the rich has influenced this story? Well, try the website called The Conversation which is the kind of body that is regularly cited, by that right-wing organisation called the ABC!

It has that brilliant FactCheck service and in 2015, then Treasurer, Joe Hockey, was pilloried for telling us that “50% of all income tax in Australia is paid by 10% of the working population,“ in an interview with the respected Fran Kelly on the ABC RN Breakfast show.

FactCheck went to Canberra’s number-crunchers, NATSEM, which has the computers to fairly verify Joe’s claims.

When they restricted the search for truth to the working age population — 18 to 65 years — and then ranked them in income groups of bottom to top 10%, it was shown that this latter group who earned more than $102,000 in 2015 paid 52% of the total tax going to Canberra. The next 10% paid 19%, the next 13%, the next 8% the next 5% and the sixth paid 2%. The first four effectively paid no tax to the total.

Now you might be asking: “Don't tax deductions linked to investments reduce the actual tax paid by the rich?”

Well, FactCheck tried an alternative method of skinning this tax cat but the result was that the top 10% paid less tax than before but it still came in at 50.5%!

This is how FactCheck concluded their study: “The Treasurer’s statement that the top 10% of incomes from working age persons pay 50% of personal income tax is correct. This reflects the progressive nature of Australia’s personal income tax system, which is applied to a society that features significant income inequality.”

Writing in The Australian in 2014, Adam Creighton looked at what taxes we paid using the ABS’s analysis of household income.

Looking at the 20% groups or quintiles, he found that only the top fifth in 2012 “…pay anything into the system net of the value of social security in cash and kind received.”
What he explained was that it’s wrong to look at what you are paid and taxed but you have to throw in benefits received, as they are like anti-taxes. When you do this, “The 1.73 million households in the middle quintile paid an average tax rate of 12.3 per cent on average incomes of $88,900,” Creighton and the ABS showed.

When you throw in things like free schools, hospitals and public transport, then by netting everything off, it “shows even ‘average’, let alone lower-income, households got back $2.70 for every $1 they paid in tax!”

That’s staggering but they are the numbers that put our whole personal tax system into perspective.

The ABS data led Creighton to conclude: “Put simply, only the top fifth of households paid any tax. The bottom 6.9 million households, while often incurring income tax liabilities and regularly paying GST, received more in cash welfare and services than they paid in.”

If you don't believe this, you could be a rare individual in your quintile but for the average taxpayer, the analysis looks sound.

It’s interesting that the top three income groups kick in 84% of all personal income tax paid to the Federal Treasury and the next election will be about whether Bill Shorten with his anti-rich policies make more appeal than the Government’s policies, which are certainly more pro-richer Australians.

Wayne Swan’s criticism of BHP links to a tax argument the company has had with the ATO for 11 years. If it loses, it could be slugged $1 billion in tax and penalties.

Mr Swan said the BHP dispute accounted for a quarter of the ATO's total $4 billion total corporate tax disputes, and accused the company of "pillaging the Australian Treasury and short-changing the Australian people, pure and simple.”

One day this will be sorted and BHP looks like they are potentially a threat to the taxpayer but, as the company points out, they have paid $66 billion in taxes over the past decade.

Rich people and rich companies might have their faults and might work hard to reduce their tax bills — like all rational taxpayers — but they do a fair bit to pay their way.

Rich people haters look like they’re not permitting facts to get in the way of a good story.

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The market crash of 1987 – the crash I had to have!

Wednesday, October 18, 2017

By Peter Switzer
Overnight, the Dow Jones Industrial Average, the famous stock market index, went into never before territory beating the 23,000 mark. It comes around the same time of year this very index crashed on Monday October 18, 1987 scaring the world into fears of another Great Depression but the ill-winds that came out that world-scaring event ended up being the crash I had to have!

Let me relive that time briefly as some market watchers wonder if Wall Street can continue to defy gravity, as stocks creep higher every day.

Our crash was October 19. For the Yanks, it was Black Monday. For us, it was Black Tuesday and it’s a Tuesday I’ll never forget. Panic reigned on the local stock market and ABC TV decided to lengthen their Richard Carleton- Max Walsh program, nicknamed the Car Wash Report. We were so scared that the program was extended by an hour, if I recall correctly, and gee, the ABC was great in those days!

I’d been making a radio documentary with the pioneer of FM radio news, “the mighty whitey” David White. He was a former 2SM Good Guy, turned news junkie and he knew news for FM radio had to suit the format.

His three-hour radio doco was called “Are We Living on Borrowed Time?” and he had interviews from really smart people broken up by great songs, such as Money by Pink Floyd and Simply Red’s Money’s Too Tight to Mention and so on. Gee, FM radio was great then!

I was teaching economics at the University of New South Wales at the time and had a Wednesday column in the Daily Telegraph, which followed me putting together an HSC Supplement for the newspaper in previous years, where I wrote the economics stuff.

Gee newspapers were great then!

I was an economist, which I still reckon I am today, but I only had a cursory interest in stocks, in so much as the market affected the economy. In the previous year, I’d decided to read everything on business/markets I could get my hands on and was on a steep learning curve.
In those days, the AFR was the business bible so when David White rang me at home at 5am on the Wednesday to get me to explain to listeners what had just happened, I realised I’d left my copy of the AFR at uni!

So my first recorded piece to an audience in Sydney, where Doug Mulray had something like a 25% share of the market, was based on what I’d read the previous day. At least I knew why the Yanks had sold off on Monday their time — that was in a Tuesday newspaper.

After my first grab was recorded for the early news, I sprinted to the newsagent’s — we lived in Paddington in Sydney so the guy was open super early! Gees, news agencies were great then!

By 6am, I’d digested enough to be an instant expert but this whole experience changed me forever!

It changed Australia too, with our stock market losing 41% in the month of October. It was the day the Dow had its biggest ever one-day slump of 25%!

Out of all this, famous entrepreneurs like Alan Bond and Christopher Skase were shown they were wearing precious little when the ‘tide’ went out. And Westpac nearly became a spent force, becoming a takeover tussle between Kerry Packer and AMP. Eventually the crash led to a recession where unemployment went over 10% in the early 1990s.

It can take time but the consequences of market crashes can hang around longer than many expect. Stock markets can rebound pretty quickly after a crash, which we saw in 2009 and which I’d been predicting based on my lessons from 1987. History can be a good tutor on many of these subjects and it often works out, provided the crash doesn’t create a Great Depression.

You don’t easily see crashes coming because we can get blinded by all the positive stuff. I’ve learnt to look for screwy things happening in foreign exchange markets but trying to work out when a stock market might crash is a very tricky task to master.

My consensus of the smart people I trust as good judges, which I’ve collected since October 1987, who have helped my media exploits, my own investments and the growth of my financial services company, makes me think we have time on our side when it comes to stocks.

Donald Trump has to get a tax win before year’s end and China, which is now holding its National Congress, has to keep growing better than its doubters have been predicting. If this persists, with the world economy tipped by the IMF to grow faster next year, then I’m good with stocks in 2018 but I’ll be looking for signs that this bull market is running out of steam.

The Crash of 1987 was the first crash I had to have, which launched my radio and then TV guest expert career. The GFC was the second crash I had to have as it created my SWITZER program on the Sky News Business channel.

I always argue that when crashes happen, the world wants to listen to people with grey hair or no hair but I got away with it in 1987!

That said, the fear that this crash generated made me know that I needed to change my educative ways to help people understand money and to learn how to invest in quality assets to build wealth.

It’s been a great journey and became the basis for our business that now straddles a listed fund (SWTZ), financial planning, accounting and websites like Switzer Daily. We even own a cool fashion magazine called Russh!

And we have more than 60 staff and key partners and contractors, who help us make it happen.

It has changed my life from being an academic to being what I am today.

Yep, it was the crash I had to have. I hope you all get a crash opportunity in your lives but let me say, it didn’t come to me by pure chance. I had to put myself in the way of opportunity and that’s a big part of the success story. Work out what you want. Determine the price you have to pay and pay the price.

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The property lesson young people have to have!

Tuesday, October 17, 2017

By Peter Switzer

What’s the big wealth-building lesson every parent should learn for themselves and then pass on to their children and children’s children? The lesson follows but before the summary/conclusion, let me give you some background.

Fairfax’s impressive, though sometimes a little too excessively negative, Clancy Yeates showed us some work from Gregory Sutton, Dubravko Mihaljek and Agne Subelyte, who are researchers at the Switzerland-based Bank for International Settlements. They looked at house prices from 1961 to 2016 (55 years) and this is what

Clancy says they found: “The long-term rise in Australian house prices since the early 1960s has been the most sustained property market upswing in the world in recent decades.”

And he put the whole story into perspective with this: “Since 1961, it [the research] says the cumulative gain in Australian property prices is a whopping 6,556 per cent. That compares with a cumulative 1,332 per cent, or 13-fold, rise in United States house prices over 47 years.”

The work looked at 47 countries and the pointy-headed researchers wanted to understand how interest rates affect property prices.

They found:

  • Upswings vastly outnumber downswings.
  • For 80% of the time, studied property sectors were in upswing mode.
  • Upswings on average last about 13 years.
  • Downswings last about five years and Japan had the longest of 13 years!
  • Since 1961 (55 years), our property prices rose by 6,556%.
  • Norway saw theirs go up a huge 7726% but this was over 66 years!

"Is housing a good long-term investment?” the researchers asked. “Our data suggests that the answer is an unqualified ‘yes’: real house prices increased on average by close to 7 per cent per annum in the sample of 20 advanced economies for which there are 45 years of data on average."

If you want to get academically picky, you could weaken the argument for ‘investing’ in property but the case for property has been proven, at least in our heads, for centuries. Academic proof of the wisdom of buying property for the average investor is nice to see. Thanks must go to Clancy and the researchers.

So, what’s the lesson you pass on?

It’s pretty self-evident: loving property and sacrificing to get it can be hard but in more cases than not, it will be rewarding.

Let’s imagine someone who started work in 1970 bought a home for $18,700 in Sydney, which was the median price for such a property then. By 2016, this has grown to $1,124,000, which is a 5,910% growth in this Sydney asset. This was a median price asset not an exceptional one!

So what do you tell your children? Buy property and if you can't afford it now because the market is too hot or your income is too low, then wait for price slowdowns and income growth.

Tell them getting wealthy is not an instant-gratification game. You need time to get smarter, wiser and money savvier.

Apartment oversupply issues will bring about lower prices and that will be a buying opportunity over the next couple of years but use the time to become a money expert.

I’m not arguing it’s easier now for young people to own property. It has always been hard to buy real estate. Few people lived the life of Reilly in the early days of high interest rates and slow rising incomes, but eventually kids went to school and one income became two and material life improved.

I know it’s hard for young people to get into property but you need to tell them that sometimes you need to bide your time, possibly lower your expectations and build up your knowledge. And eventually they will fulfill their plans.

The legendary US thinker and speaker, Jim Rohn once told us: “Don't wish it was easier, wish you were better. Don't wish for less problems, wish for more skills. Don't wish for less challenges, wish for more wisdom.”

That’s another great piece of advice to give to your children and your children’s children.

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More housing BS! But please read entire story before tweeting!

Monday, October 16, 2017

By Peter Switzer

As per usual, another weekend newspaper has continued the house price anxiety with a report that the Reserve Bank is going to do a job that APRA should do to assess how exposed we and our banks are to the property sector.

For the past three years, news outlets have worried about fast rising prices but now it’s falling prices! And then there were liar loans and there’s always debt-servicing concerns.

Even when most respected economists can’t see a rate rise for around a year, and even then the rate rises after are expected to be very slow, we’re supposed to worry about debt-servicing, with interest rates at 4%.

One tweeter responded to my carefully argued story last week that the facts show our household debt situation looks manageable.  She said the situation of her friends, who were using debt to live when they had big mortgages, was proof that I’d got it wrong!

It didn’t matter that I showed charts, history and the views of a former RBA board member, Dr. John Edwards, on how our problem is exaggerated. In her mind, her friends credit card behaviour proved I was wrong.

In the economics game we do look at anecdotal or observable facts to question our views but we don’t look at a couple of households and say that we better kill our economic analysis!

Edwards thinks interest rates will rise quicker than most economists believe but he still thinks we’ll be able to cope with the higher rates.

In his most bullish case, he thinks the RBA’s official rate should go from 1.5% to 3.5% in as little as two and a half years. However, he also said it could take five years for that to happen.

But this former banking chief economist and Treasury adviser says Aussie households will cope, which is a story worth promoting in itself.

Author, social commentator and playwright George Bernard Shaw was taken to Russia in 1933 and came back talking about how great everything was but his trip was crafted such that he did not see evidence that the Socialist experiment had put the USSR into one of its worst economic downturns in Russia’s history.

Observable ‘facts’ need to be tested.

Back to the recent housing scare and these lines from the AFR show how misleading this whole debate is.

First we’re told that the RBA will do bank stress tests and then we’re told that: “Preliminary work by analysts unveiled by the central bank in its twice-a-year Financial Stability Review on Friday suggests fallout of a sudden surge in bad loans in the banking sector can be unpredictable and sudden.”

Then immediately after that potentially scary revelation, the story tells us “while much of the review reiterated the central bank’s CORE [my emphasis] view that the nation’s financial system remains robust and well-capitalized…” there are, apparently, risks about 60 year olds and over with investment loans!

We’ve stopped worrying about selfish investors ‘stealing’ homes from first home buyers at auctions but now the big worry is about older borrowers. Give me a break!

This is the story that should be told not to mislead: “The RBA says our financial and banking system is not badly exposed to the housing sector but we’re going to keep pressure testing it.”

Too many journalists ignore facts and love Armageddon scenarios as they create headlines and promotion for their “bylines” but it scares people from benefitting from upturns.

There’s a number of often cited experts, who tipped Great Depression-like outcomes out of the GFC, which pushed people into term deposits, which were around 6%, but look where they are now. They’d be lucky to have got 30% return out of term deposits over that time but they ran to safety because they were scared.

Doomsday merchants plus media equals scared, impoverished investors!

If they’d bought the stock market index or a great property in Sydney or Melbourne in 2008, they’d be up over 100% plus, and more if you add rent or dividends into the equation.

My colleague at Sky, Carson Scott, printed me out a story from the New York Times about big US companies that got tax holidays in 2004 to bring home income parked overseas to avoid tax. A usual tax rate of 35% was dropped to 5.25% and $299 billion returned ‘home’ as a consequence!

Lobbyists said it would create 500,000 jobs and that’s why politicians bought the idea but MIT economists found many big companies cut jobs, increased executive salaries and instituted share buybacks, which raised share prices.

When I read this, I shared Carson’s disgust but being an economist I thought it would be interesting to see what happened to the unemployment rate after 2005. The chart below shows what happened:

Unemployment fell from over 6% to over 4% over that time and I reckon the share buybacks and some of company investment that followed helped improve the US job market. I’m not saying it had a single-handed role but it would’ve had a role.

The MIT economists might have been looking specifically at the tax break and the direct job creations or they might have been simply biased but we can be misled by looking at ‘facts’ in isolation.

In the housing debate, people are pushing their own barrows. One hedge fund manager, who was shorting the banks, actually created a story that newspapers ran for a week until one of the newspaper’s top economic thinkers actually bagged his paper’s coverage!

Now that was a story that should’ve been a headline.

I know we’re highly borrowed but our economy is on the improve, so it’s less of a worry. And John Edwards thinks we could cope with a 2% rise in rates without big problems occurring.

He would have tested his view at the Lowy Institute, where he now works and thinks, before he went to the media.

Australians love their property and they have to repay their loans, which many US borrowers don’t. This national obsession actually makes our banks safer because we are better borrowers.

The world outlook for interest rates is up but slow. The world economic growth rate was upgraded last week by the IMF from 3.6% to 3.7%, which is a really healthy growth rate.

Even through the 1991 recession here, when unemployment went over 10%, house prices did not collapse, which is another positive story for our banks. Anyone trying to create scary headlines on housing is more interested in making a name for themself than giving you objective commentary.

It’s okay to say there are risks out there. I agree there are risks, but they look manageable. And every economist I talk to agrees, apart from Professor Steve Keen, who has been wrong since the GFC. However, you should also say clearly that the current situation, as assessed by the country’s central bank, is pretty damn good.

Our banks do a lot of wrong, public relations wise, with their customers, but professional share analysts know, for example, why CBA’s share price has gone from $26.75 on 30 January 2009 to $76.66 today — that’s a 186% gain, even before dividends are thrown in — and it’s because their risk managers are not as stupid as journalists make them out to be.

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Just how bad is our household debt?

Friday, October 13, 2017

By Peter Switzer
Doomsday merchant economists such as Professor Steve Keen keep warning us that our debt to GDP ratio is one of the worst in the world and it will come back to bite us, pushing our economy into recession.

However an arguably better qualified economist and former RBA board member, Dr. John Edwards, is happy to hose down the fired up prophets of doom who point to our debt to household income being over 200%.

But who is right?

This chart just below shows we’re up there in the household debt to household income stakes:
And we have really gone for it in recent years. In 1988, it was about 60% and we’re now around 200%. But note how we were at 160% when the GFC hit and we soldiered through that as an economy pretty well, with unemployment not breaching the 6% level, while equivalent countries saw double-digit jobless rates.

One of the big worries is that our banks could be vulnerable to over-borrowed customers, but in the GFC, our top four banks were in the top 10 in the world, so over-borrowed Aussies weren’t a problem then for banks and interest rates were a lot higher than now throughout that period.

John Edwards thinks interest rates will rise quicker than most economists but he still thinks we will be able to cope with the higher rates.

In his most bullish case, he thinks the RBA’s official rate should go from 1.5% to 3.5% in as little as two and a half years. However, he also said it could take five years for that to happen.

Some economists think it will be two years before the RBA raises rates by even 0.25%!

Some commentators think the household debt to income worry will make sure the RBA is slow to raise rates but Edwards thinks that could be a misguided view.

That said, recently the IMF was warning about our debt to income challenges. Economists at the IMF have found countries that grow out of a debt-fuelled housing boom eventually have slower growth and higher unemployment. And it often brings a banking crisis, but the economists did concede that well-off countries can service higher debts more comfortably because they have more income. Well, der.

And given how low interest rates are right now, and that most economists think the first rate rise will be mid-2018 or even later in that year, it seems the threat of higher rates for over-borrowed households is a few years off yet.

Recently, UBS worried us all with claims that a third of loans were liar loans but closer analysis showed the biggest porky probably came from UBS’s press release on the subject, which the media devoured.

Jessica Irvine in Fairfax summed it up sensibly.

“Overall, it really is a bridge too far to compare Australia's lending practices to the original "liar loans" – a term coined to describe the "stated income loans" which flourished in the US ahead of the GFC, whereby borrowers were required to produce no proof of income to get a loan,” she explained. “They were a sister lending sin of the "NINJA loans" – "no income, no job and no assets" – which also took root.”

In Australia, our lending is pretty closely regulated and anyone trying to argue we have a Big Short movie problem here isn’t letting the facts get in the way of a good story. (In this movie, some smart hedge fund guys saw how liar loans and related products left banks vulnerable. These guys shorted financial institutions and made a lot of money and contributed to the GFC stock market crash panic.)

Not helping doomsday merchants are low mortgage defaults here in Australia and the fact that “the proportion of loans that are genuinely "low-doc" has fallen dramatically, from about 8%pre the GFC to around 1%,” Jessica points out.

Data from the Australian Securities and Investment Commission (ASIC) in 2016, found 83% of investors and 78% of owner-occupiers on interest only loans earn more than $100,000 a year, compared to 64% of investors and 60% of owner-occupiers entering into principal and interest loans.

So the borrowers who might have to shift from interest only to principal and interest loans are the types who could afford it, so the risks are lower than scare merchants would like it to be.

I think it’s a big mistake to compare Aussie borrowers to US borrowers who can hand in the keys to a loan and drive away in their Mustangs. Here in Australia we have recourse loans, which means we pay them back unless we lose our jobs.

Thankfully, the outlook for the labour market and the economy is positive so it’s less likely our banks will be tested by an avalanche of debt dodgers.

Dr. Edwards rejects the argument that our households are in a "fragile position".

"They are not,” he told the AFR. “Collectively, households in Australia have never been better off.

"Household net wealth in nominal terms is more than seven times greater than it was when the long Australian economic expansion started in 1991."

He also takes on the IMF and its warnings that the high debt to income levels will threaten the macro-economy.

"In Australia this is not the case," he said. "The growth of consumption spending over the last eight years has been well below its growth in the previous 12 years

"As a share of GDP, household consumption is at the lower end of its long-term range," he explained.

This reduces the problem of high debt levels hurting demand and economic growth as interest rates rise in the early phases of the tightening cycle for the price we pay for borrowed money.

Our household debt to household income is high but it looks manageable and pretty smart guys like Edwards, AMP’s Shane Oliver, CommSec’s Craig James and the Reserve Bank of Australia, are relaxed about it all, even if they are watching it cautiously.

Our vulnerability to future debt shock is being exaggerated and often by ‘experts’ who have been preaching doom and have been wrong since the GFC.

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Why does super face a Dangerfield Syndrome? It gets no respect!

Thursday, October 12, 2017

By Peter Switzer

The number 25 has figured prominently in the big milestones of 2017. The big news was that we beat 25 years of economic growth without a recession to make us the world champs of economic growth.

But there was a less celebrated benchmark reached when compulsory superannuation marked its 25th year of operation. This was one of Paul Keating’s crowning glories as a Treasurer. Younger generations will eventually retire with super nest eggs way over a million dollars. For many, it will be over two million bucks and they should occasionally recognise what good government policy can achieve.

Given the undisputed greatness of super, my big question is: why do we disrespect it so?

Seriously, even with the annoying rule changes that governments impose on super, it really has been a great performer.

Warren Chant, the founder of the super-watching business — Chant West — actually created a business around super and really should send Paul Keating a Christmas card each year!

A growth super fund is a common one used by many Aussies, which has 61% to 80% invested in things like shares and other high yielding assets. These funds aim for a 3-4% return, after inflation and fees, over a five-year rolling period.

These funds plan for one bad year in five but the actual 25-year story is one of outperformance.

However, our flagship super funds have averaged 5.8% over inflation. And remember, this number is brought down by the dud funds out there, though even those aren’t all that bad. These second raters just can’t compete with the best funds out there.

If you need to know the good’uns, have a look at the table below from

(The creators of these comparison tables have to say that “past performance is not a reliable indicator of future performance” but I’d rather a fund that has done well over three, five and 10 years, as it indicates a consistent, successful strategy.)

Good super funds compare well with very good suburbs for real estate, as the table from two years ago shows:

As you see, returns of 8-11% define great city suburbs, much like great super funds but why does real estate get so much love and respect while super gets treated like that legendary comedian, Rodney Dangerfield, who often complained that he got none!

Like most Aussies, I love property but I think it’s time we talked up the need for our countrymen and women to get up close and personal with their super fund. Dare I say, love your super like you’d love your house or investment property?

So how do I know that most people treat their super with disrespect? Well, I’ve been doing radio and answering questions on super for decades and have talked to our financial planning clients over the years.

They tend to know their fund and their returns but they seldom know the fees their pay, the comparative fees of other funds and their better or worst performance. These are vital issues and selecting an expensive, poor-performing fund is like buying an expensive house in a suburb next to a nuclear reactor!

Let me show you what happens if someone goes into a dud and expensive fund by comparing what happens for a savvy super-person.

Imagine a 21-year-old is left $50,000 in an inheritance, which she puts into a super fund that charges 2% and performs below average. Let’s say the net return after fees is about 6% while a better fund comes in at 9%.

For the worst fund, the $50,000 doubles every 12 years. That means by the time the young lady is 33, the inheritance is $100,000. By 45, it’s $200,000 and by 57, it’s $400,000. And on retirement at 69, it has climbed to $800,000.

Now let’s see if our supergirl is savvy enough to get a 9% return in a better fund. Her money doubles every eight years, so by age 29 the nest egg has climbed to $100,000 and by 37 she’s got $200,000 in super. At 45 she’s got $400,000 while at 53 she’s at $800,000 and has $1.6 million by 60. And at age 68, she has $3.2 million! And by the way, she can retire one year earlier than her super disrespecter!

To summarise, the savvy supergirl retires with $3.2 million on top of her regular super, which could be a million or more, while the super disrespecter only pockets $800,000 and has to work an extra year.

I reckon this example, which I conceed could be tweaked for other realities, still proves the point that the more you care about your super, the more rewarding that super will be.

That’s a big price to pay for not respecting your super that already takes 9.5% of your pay each week.

When it comes to really knowing and respecting your super, imagine you had a great property that delivered you rent of $100,000  year. Further assume this is your only source of income in retirement because you, as a self-employed person, chose this investment property over a super fund.

Would you know all about it? Would you know if you were getting a competitive rent? Would you have a good idea of what it’s worth and would you look after it as your hen that lays the golden nest egg for your retirement?

To all questions the answer clearly would be ‘yes’. That’s why anyone reading this who’s indifferent to their super should start putting super out of the Dangerfield syndrome.

For many of us, our super funds could be worth more than any property we might buy and so they certainly deserve respect.

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What you should tell your kids about getting richer

Wednesday, October 11, 2017

By Peter Switzer
One of the greatest problems of grown ups, which most of us choose to ignore, is the role we play in influencing our sons, daughters, employees or colleagues who we’re expected to lead. I was looking at a lot of my expert mates who tweet every day on subjects from Malcolm Turnbull to same sex marriage to what’s going on in Canberra, Washington and Pyongyang. I wonder what they tell their offspring about how they grow their wealth.

Most of my mates in the media are surprisingly smart but they admit to not being money smart and even numerous business journalists have confessed that their personal finances could be miles better!

I want to give you something simple and concise, which, in the absence of a personal financial plan created by a professional adviser, would serve as solid advice that could create richer family members in the future.

I always start with this chart to get people interested. It shows how $10,000 becomes $453,000 between 1970 and 2009 — the year after the big 50% GFC crash of the stock market. And anyone could have done this either with or without much help but they needed to be shown the method and they needed to stick to the ‘advice’ the process implies.

So what did the $10,000 go into? If it went into the equivalent to the exchange traded fund such as IOZ, which buys our top 200 companies or my own SWTZ of Switzer Dividend Growth Fund, which is designed to track some of our best dividend-paying stocks, you should get a similar result as shown in this chart.

And if someone had kept putting more into this collection of top stocks, even through the many crashes and corrections of stock markets, they would have made around 10% or more because this number consistently comes out for investors in stocks over the long term.

So what are the words of wisdom we should pass on to our kids and even ourselves, if your money story needs to improve?

First, it’s simple, find money. Try to save as much as you can by doing a budget and seeing where you can cut your costs. You could try to get extra income, say from an extra job or a part-time business on the side but the goal has to be to find money!

Second, use the stock market to grow rich via a safe collection of stocks, which will tap into the magic of compound interest over time. You could add more to super via salary sacrifice and that’s good for older Australians but youngsters will want access to their money, say to buy a house later in life.

Third, stick to the strategy and remember bad and scary times can be the best times to buy quality assets. During the GFC, the CBA share price got as low as $27 and it’s over $75 today. We bought an investment in 2002 for $1.1 million, which now is valued at $2.3 million!

Wise parenting says you should give your kids a handful of rules and all you need to do is to continually repeat them. The same applies to getting richer — give them some simple rules and repeat them over and over.

With Christmas looming, maybe an ideal present for a growing up child is buying two books on getting rich that you both read and talk about.

I know it's an outside-the-square thought but you and your son or daughter are worth it!

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Economic shock! What I’m negative about

Tuesday, October 10, 2017

By Peter Switzer
This one will shock some of my critics who wonder why I’m so optimistic when there’s so much you could worry about - the economy, the stock market, government debt, wages and consumer confidence.

It might surprise those who think I’m always optimistic but there are concerns I’m watching. However, given the positives, which I listed last week here, I do believe in the list of good things that trumps the list of bad things, and Donald Trump, who remains one of the pluses in as much as Wall Street still believes in his tax cuts.

That all said, let me list the things that worry me:

  • Slow wages growth has been persistent for too long, though the national wage bill rose 1.2% in the June quarter and this was the biggest lift in two years! This needs to be the start of something good.
  • Consumer confidence remains persistently low and these two diagrams show it all:


Note how the consumer confidence number has been below 100 for 10 months straight. When that happens, pessimists outnumber optimistic consumers.
In the second chart, since the GFC and the end of the stimulus from government spending (that came with $900 cheques and lots of school halls), confidence has hung around or below the 100 level. That said, when the GFC market crash happened, consumer confidence was around 80! So it’s not great now but not as bad as it could be.

  • Retail trade, which fell 0.6% in August after a downwardly-revised fall of 0.2% in July. Sales had averaged gains of 0.4% a month in the previous four months. Annual sales growth fell from 3.5% to 3.1%. I don't like these numbers but retail doesn’t measure services and it has fallen from around 33.3% of household spending in 2010 to a tick over 31.2%. Going to a gym is a service that eats into spending and the modern shopper is increasingly going online to buy goods cheaper.
  • Power bills! While they’ve gone up in dollar terms, The Age’s Peter Martin recently showed that our electricity and gas outlays as a percentage of household income is 2.9%. And guess what it was back in 1984? Yep, 2.9%! A few years ago, it was 2.6% but the rise has been small up to last year, which his numbers go up to, but I’d be surprised if they were much higher than 3.3%.
  • The dollar is too high and needs to go to around 70 US cents to give us the economic growth that will spark wages and stock prices growth.
  • Housing construction is slowing and will slow down but those who are worried about this are jumping the gun. We probably have one or two good years before it’s a real worry.  “Approvals by local councils to build new homes rose by 0.4% in August after falling 1.2% in July and soaring by 11.1% in June. In trend terms, approvals rose for the seventh straight month, up by 1.1%,” reported CommSec’s Craig James only last week.
  • The Budget Deficit is big and was expected to be a $37.6 billion deficit for 2016/17 but it ended up at $33.15 billion (or 1.9% of GDP). The USA’s is 3.2% and the UK is at 2.3% of GDP.
  • Our Government debt to GDP is a worry at 34.2% of GDP but the USA is at 106.7% of GDP and the UK is at 84.6% while the great Germany is at 84%. Japan? Don't ask, at 237% of GDP!
  • How quickly the US central bank — the Fed — raises interest rates over 2018. If it’s too fast, it could hurt Wall Street at a time when I expect our stock market to be on the rise.
  • The US Congress saying no to President Donald Trump’s tax plan, which Wall Street would absolutely hate! However, on the flipside, if they say yes, it will be great for stocks.
  • China is a worry for economic slowdown and debt reasons but it seems to be growing better than experts were thinking. The official manufacturing gauge rose from 51.7 to a 5-year high of 52.4 in September, with the services gauge up from 53.4 to a 3-year high of 55.4. On debt, as it lends to itself and the rest of the world (the USA is its biggest customer for borrowed funds), as Communists these guys can always change the rules to fix a problem.

That said, when I can’t fully understand something I won’t invest in it so it worries me when a risk isn’t fully weighable.

Things like house prices worry me a little but they are starting to increase at a slower rate, while auction clearance rates are slowing in Sydney and Melbourne, which is a good thing.

One final biggie is household debt to GDP, which is something that’s often cited by doomsday merchants, such as Professor Steve Keen, and hedge fund operators, who are trying to make money out of shorting Aussie banks.

By the way, our banks are in the top 50 banks of the world and they were in the top 10 when the biggest banks in the world looked like nincompoops when the GFC hit.

I admit that our household debt is big but someone like John Edwards, a former banking chief economist and RBA board member, agrees with me that the threat of this debt is exaggerated. I’ll look at this as a separate piece later this week.

As you can see, the problems we face are either getting a bit better (such as wages growth) or they’re very hard to understand (such as China’s debt) but, overall, the magnitude of the positives explains why the very cautious Reserve Bank of Australia thinks we’ll grow at 3% plus over 2018. We couldn’t do that if economic Armageddon reigns.

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US job numbers look disastrously bad! But are they?

Monday, October 09, 2017

By Peter Switzer
One of the best developments for the world economy, the Oz economy and our stock market is the strength of the US economy. So what does the really, really bad US jobs number say about the world’s number one economy?

This result was a big miss, with 80,000 jobs expected but in fact 33,000 actually lost! As I said — that’s a big miss and is the first monthly job decline in seven years! The chart below shows how the US employment numbers were an indicator of how good that economy’s rebound was.
Despite this, the unemployment rate fell from 4.4% to 4.2%, which shows you how a big wind can hit participation rates and make jobless numbers look good.

To explain how hurricanes kill jobs, check this out in the New York Times from Carl Tannenbaum, chief economist for Northern Trust: “The numbers were certainly blown around a lot by the storms. The interruptions created in the hurricane regions were seen in leisure and hospitality especially, which had a huge decline.”

Wall Street banked these numbers as not having long-term relevance, with the Dow Jones Index only down 1.72 points, and it could actually help stocks by delaying the Fed’s December rise. But Tannenbaum believes that the US central bank will be “looking past” these wind-blown numbers.

OK let’s believe this analysis, but why not ask what the other US economic indicators are saying. I’m looking for the US economic recovery to continue to help Wall Street rising and to help the world economy grow faster and, in doing so, help our stock market head higher.

Here’s a quick summary of what’s going on in the US economy:

  • The economy grew at 3.1% annual rate in the second quarter of this year, which is the best showing since early 2015.
  • The solid inflation number in the USA for August of 1.9% put a US rate rise back on the table for December but this was pre-hurricanes.
  • US factory orders rose by 1.2% in August (forecast 1.0%) having declined by 3.3% in July. 
  • The ISM non-manufacturing purchasing managers index in the US rose from 55.3 to 59.8 in September — the highest level since August 2005!
  • The ISM manufacturing index in the US rose from 58.8 to a 13-year high of 60.8 in September (forecast 58.0).
  • The Philadelphia Federal Reserve index rose from +18.9 to +23.8 in September (forecast +17.2). The leading index for the US economy rose by 0.4% in August (forecast +0.2%).
  • US industrial production was down 1% in August but this one only one month. The chart below shows what the trend tells you about US industry since 2016 and it looks positive. The hurricane cleanup will eventually push up this production!

I could go on but the picture is clear and it’s a pretty, positive one. But don’t believe me, this is what CommSec’s Craig James said of the Fed after its last interest rate meeting decision: “The Fed maintained the target range for the federal funds rate at 1.00-1.25% as expected. Eleven of 16 policymakers expect one more rate hike in 2017. Fed projections suggest three rate hikes in 2018. Median forecasts for GDP (economic growth) were lifted in 2017 from 2.2% to 2.4%, while inflation forecasts were trimmed from 1.7% to 1.5%. The Fed will start unwinding its US$4.2 trillion holdings of securities in October by initially cutting $10 billion eachmonth from the amount of maturing securities it reinvests.”

This US economic story remains positive and if President Donald Trump can get his tax cuts through Congress, then we’ll all be off to the races. Go Donald!

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As an economic optimist, does retail worry me? A little

Friday, October 06, 2017

By Peter Switzer

As an optimist on the economy right now (in agreement with the Reserve Bank of Australia, Federal Treasury and most banking economists), how do we make sense of the bad retail number for the month of August?

In case your economic statistical radar detector missed this one yesterday, we spent 0.6% less in retail outlets in August than we did in July. Of course this could be hit to the boundary by saying it’s only one month’s figures, but it’s not — we’ve had two negative retail reads in a row as July was down 0.2%.

If the July number was 0.4% or higher, then I’d be worried that a notable negative trend is developing, which makes September’s number that we see next month a ‘must watch’ for economic tragics, Federal Treasurers and anyone betting on an improving economy, like yours truly.

In a nutshell, call me a materialist economist but I’m hoping that economic growth picks up towards 3% by year’s end, bringing with it more jobs, higher wages, better consumer confidence, a solid Christmas shopping period and a higher stock market, which is great for our super funds as well as business confidence.

If this happens, we have a virtuous cycle developing that rolls confidently into 2018. So what do I make of these retail numbers? Let’s look at the take-outs clues:

  • Non-food retailing fell by 0.7% in August to be up 2% over the year.
  • Spending rose the most at “Other retailing” (Internet retail, antiques, flowers), up 1.7%; followed by “Department stores,” up by 0.7%; and “Clothing retailing” up 0.1%
  • Spending fell the most at “Newspaper and book retailing,” down 2.3%; followed by “Cafes, restaurants and catering services,” down 1.8% and “Electrical and electronic goods retailing,” down 1.6%.
  • Sales by chain-store retailers and other large retailers fell by 0.3% in August, after averaging gains of 0.5% a month over the previous four months. Sales are up 3.8% over the year.
  • Sales fell in all the eight states and territories: NSW (-0.2%), Victoria (-0.8%), Queensland (-0.8%), South Australia (-0.6%), Western Australia (-0.6%), Tasmania (-0.7%), Northern Territory (-0.7%), ACT (-0.8%).

I’d like to pluck a few positives from these numbers but, as you can see, all states were negative and I suspect rising power bills, slow wage rises, recent interest rate rises from the banks and general low consumer confidence is hurting retail sales, though there was one aspect of these figures that looked questionable.

The lower numbers told us that we spent less in cafes and restaurants and I loved the take on it by Bank of Melbourne economist, Janu Chan, who observed: “Apparently, Australians were dieting over August!”

Sometimes stats can be unreliable, so seeing September’s reading will be important but consumers need a shot in the arm to spend more on goods and this could be a clue for these weak numbers. Retail figures don’t show our spending on massages, pedicures, hairdressing, yoga, pilates, car washing, gym costs, etc.

I can’t believe how strong and developed younger Aussies are looking nowadays but so many now go to gyms or physical exercise instructors every morning and it all costs money. I reckon the new age consumer is buying more personal self-improvement services and more online. These purchases are generally at lower prices, which reduce the retail spending figures. Well, I damn hope so.

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