We wish you a safe and happy break, and look forward to new beginnings in 2024.

We have prepared an end of year wrap up video. Please click on the image below to view it.

As part of our tradition, Fintech Financial Services (Fintech) has made a donation to the ‘National Breast Cancer Foundation’ (NBCF.org.au) on your behalf – instead of sending Christmas cards in the mail.

Business Hours Over the Holiday Season
Closed: Friday 22nd December 2023
Re-opening: Monday 8th January 2024


For any urgent matters during this period, please call mobile 0419 833 777.

The team at Fintech sincerely wish you a safe, happy and fun holiday period.

We look forward to working with you in 2024 and beyond.

Merry Christmas

Albanese Labor Government’s Second Budget

“Stronger Foundations for a better Future”

Treasurer Jim Chalmers has delivered Australia’s first budget surplus in 15 years. The slim surplus of $4 billion represents 0.2% of GDP and an approximate $40 billion turnaround from Labor’s mini-budget delivered last October.

Please note, these changes are proposals only and may or may not be made law.

A surplus is an important achievement for Labor. It is its first since 1989-1990.

This budget was delivered against the backdrop of challenging circumstances for the nation, including uncertain global economic conditions, increasing cost-of-living pressures and interest rates, and persistently high inflation.

Despite the boost that low employment and commodity prices have delivered to the budget bottom line, Labor has stuck to its budget repair strategy of modest tax changes, and reprioritisation of programs.

Prime Minister Albanese has described the budget as one aimed at “helping people struggling to make ends meet” without “pouring fuel on the inflation fire”, a narrow framework to manage.

Inflation is forecast to fall from 6% this financial year to 2.75% in 2024-25, while economic growth will drop from 3.25% this year to 1.5% next year. Unemployment is forecast to edge higher at 4.25% in 2023–24, and 4.5% the following year.

Like last October’s mini-budget, this budget keeps focus on core areas of spending – health, aged care, defence and the National Disability Insurance Scheme (NDIS).

It also includes significant funding for Australia’s clean energy transition and building industry capability in this area – an area the Treasurer described as Australia’s largest opportunity. Labor’s renewable energy commitments now total more than $40 billion.

This was not a budget that focused on productivity or business competitiveness outside energy transition measures and social spending priorities.

The budget has also shifted spending away from the former Coalition Government’s infrastructure priorities.

Labor has warned that the budget surplus will be short lived, with the budget returning to deficit next year. The budget remains in deficit over the forward estimates.

This will ensure ongoing focus on revenue measures, including taxation and tax concessions. For this budget the areas of superannuation, multinational business operations, the petroleum resource rent tax, tobacco, and tax compliance programs were the focus.

With an election due by 2025 and a narrow majority, this budget and future ones will be aimed at continuing to build a base of strong political support, while managing the much more complex economic outlook.

Key Announcements from the Treasurer

Cost of Living

  • Federal and state governments will deliver up to $3 billion in energy bill relief for eligible households and small businesses.
  • $1.3 billion will be invested in the Household Energy Upgrades Fund. $1 billion of this will be invested in the Clean Energy Finance Corporation to create low-interest loans for energy- saving home upgrades, and $300 million for upgrades to social housing to improve energy support.
  • $1.9 billion over 5 years to expand access to Parenting Payment which will see eligible single parents receive Parenting Payment until their youngest child turns 14 (currently up to 8 years old).
  • $4.9 billion over 5 years to increase the rate of income support payments by $40 per fortnight, while also expanding eligibility for the existing higher rate of JobSeeker to recipients 55+ and over (currently applies for 60+).

Energy and Renewables

  • $2 billion to position Australia as a world leader in hydrogen production.
  • Funding for the Capacity Investment Scheme’s first initial auctions to unlock new investment in firmed renewable generation.
  • Leveraging of existing funds to allocate $12 billion to transformational transmission projects and over $1.4 billion to regional net-zero growth opportunities.
  • $400 million to fund a Net Zero Authority to help workers, communities, and investors in their decarbonisation efforts.
  • $46.5 million to the Australian Energy Regulator to regulate energy markets and protect consumers.
  • $1 billion to Tasmania’s Battery of the Nation projects.
  • $1.5 billion to renewable energy zones and offshore wind in Victoria.
  • $4.7 billion to unlock critical transmission in NSW.
  • $1.3 billion investment in Household Energy Upgrades Fund.
  • $7.4 million to support the introduction of a Fuel Efficiency Standard.
  • Extension of the clean building managed investment trust withholding tax concession to eligible data centres and warehouses where construction commenced after Budget night.
  • Developing a Future Gas Strategy to support Australia’s energy system to reach 82% renewables by 2030.
  • $57.1 million to develop Critical Minerals International Partnerships.
  • $38.2 million to establish a Guarantee of Origin scheme to underpin markets for green energy, including hydrogen and other low emissions products.
  • $14.8 million to establish the Powering Australia Industry Growth Centre to support Australian businesses to manufacture, commercialise and adopt renewable technologies.
  • $400 million under the Powering the Regions Fund to be allocated to the Industrial Transformation Stream to support the growth of new clean energy industries in regional areas and decarbonise existing activities.
  • $400 million under the Powering the Regions Fund to the Critical Inputs to Clean Energy Industries stream to provide grant funding to support the development of clean energy industries by investing in sovereign manufacturing capability of critical inputs, such as steel, cement, lime, and aluminium.
  • $600 million under the Powering the Regions Fund to the Safeguard Transformation Stream to support trade exposed facilities covered by the safeguard mechanism to reduce their onsite emissions and boost competitiveness.


  • $5.7 billion over 5 years to strengthen Medicare.
  • $3.5 billion to triple the bulk billing incentive paid to GPs to bulk bill consultations for families with children under 16, pensioners and other concession card holders.
  • $824.4 million in digital health, including funding to make the Australian Digital Health Agency ongoing, plus an upgrade for My Health Record.
  • A series of measures aimed at reducing the prevalence of vaping and smoking, which includes
  • $63.4 million for national public health campaigns, $141.2 million to expand the Tackling Indigenous Smoking program, and $29.5 million to increase and enhance supports to quit.
  • $263.8 million over 4 years (and up to $101.1 million per year ongoing) to establish and maintain a national lung cancer screening program.
  • $358.5 million for Medicare Urgent Care Clinics, which will fund 8 new clinics.
  • Pharmacy dispensing regulations will be modified to enable approximately 6 million individuals to purchase two months’ worth of medication for the cost of one prescription. The resulting budget savings of $1.2 billion that will be redirected to community pharmacies.
  • $2.2 billion over 5 years for new and amended listings to the PBS and a further $449.4 million for new and amended listings to the National Immunisation Program.
  • $91.1 million to commence the establishment of the Australian Centre for Disease Control.

Aged Care

  • $11.3 billion package will be delivered to fund the Albanese Government’s pledge to deliver on the Fair Work Commission ruling that lifts workers’ pay for residential aged care and in-home care which will see more than 250,000 frontline aged care staff receive 15% pay rises from 1 July.


  • $31.4 million to improve the National Disability Data Asset and $57 million to enable the supported employment sector to evolve.
  • $732.9 million in initiatives developed with the National Disability Insurance Agency in consultation with the NDIS Review Co-Chairs. This will improve capability and systems, as well as better support participants to manage their plans and fight fraud.


  • $15 billion for the National Reconstruction Fund to diversify and transform Australia’s industry and economy, through investment in priority areas of renewables and low emissions technologies, medical science, transport, value-add in agriculture, forestry, and fisheries, value- add in resources, defence capability and enabling capabilities.
  • $392.4 million will fund a new Industry Growth Program to support Australian small to medium- sized enterprises and startups to commercialise their ideas and grow their operations.
  • $286 million to renew and revive Australia’s arts, entertainment and cultural sector through its landmark National Cultural Policy Revive: a place for every story, a story for every place.

Defence and Strategic Policy

  • $19 billion will be allocated to the Defence Strategic Review’s (DSR) recommendations.
  • $3.4 billion over 10 years from 2023–24 to establish the Advanced Strategic Capabilities Accelerator within the Department of Defence to lift capacity to translate disruptive new technologies into Defence capability rapidly, in close partnership with Australian industry.
  • $4.5 billion over 10 years from 2023–24 (and $482.7 million per year ongoing) to support the initial steps in Australia’s acquisition of a conventionally-armed, nuclear-powered submarine capability.
  • $397.4 million over two years from 2023–24 to support the retention of Defence personnel and the achievement of Defence’s workforce growth target.
  • $1.9 billion over 5 years to expand Australia’s engagement with Pacific Island countries.
  • $376.9 million over 4 years (and $77.3 million per year ongoing) to maintain and improve delivery of core activities of the Department of Foreign Affairs and Trade.
  • $101.6 million over 5 years (and $11.8 million per year ongoing) to support and uplift cyber security in Australia. Including $46.5 million over 4 years from 2023–24 (and $11.8 million per year ongoing) to establish the Coordinator for Cyber Security to ensure that the Commonwealth’s cyber security efforts are strategic, coordinated, timely and effective.
  • $34.2 million over 3 years for the Australian Space Agency to continue to lead the national policy and strategy coordination of Australia’s civil space sector activities.
  • $80.5 million over 4 years from 2023–24 to support the Australian critical minerals sector to build diverse and competitive supply chains, attract international investment and transition to net zero.


  • The Government is reforming the Petroleum Resource Rent Tax to ensure a fairer return to the Australian community from Australia’s liquefied natural gas resources while providing certainty to industry and investors to support domestic gas supply and ensure Australia remains a reliable trade and investment partner. From 1 July 2023, the Government will cap the level of deductions that PRRT LNG projects can use to ensure that projects pay PRRT sooner.
  • From 1 January 2024, large Australian multinationals and the Australian operations of large foreign multinationals will pay an effective tax rate of at least 15%. From 1 January 2025, Australia will also tax the foreign operations of large foreign multinationals that operate in Australia to ensure they pay at least 15% tax in line with the OECD’s proposed minimum international corporate tax reforms.
  • The Government is proposing to reduce superannuation earnings tax concessions for those with superannuation balances exceeding $3 million. From 1 July 2025, earnings on balances exceeding $3 million are proposed to attract an increased concessional tax rate of 30%. In that scenario earnings on balances below $3 million would continue to be taxed at the concessional rate of 15%.

Data and Digital Economy

  • $2 billion in modernising outdated legacy platforms, foundational work, and new digital solutions to enhance service delivery and maximise future investment value for taxpayers.
  • $86.5 million to establish a National Anti-Scam Centre, boost the Australian Securities and Investments Commission’s work to disrupt investment scam websites, and establish Australia’s first SMS Sender ID Registry to prevent scammers imitating trusted brand names.
  • $44.3 million to the Office of the Australian Information Commissioner to take appropriate regulatory action, enhance its data and analytics capability, and support a standalone Privacy Commissioner.
  • $26.9 million in 2023-24 to expand Digital ID which is a secure and voluntary way to verify a person’s identity online, while minimising the collection of personal details.
  • $88.8 million over 2 years in the Consumer Data Right to support the CDR in banking, energy, and the non-bank lending sectors and deliver a cyber security uplift.
  • $101.2 million over 5 years to support the development and uptake of technologies that are enabling capabilities across Australian industries – commencing in quantum and artificial intelligence.


  • The government will abolish ParentsNext from 1 July 2024 and develop a replacement voluntary program, to provide high-quality pre-employment support.
  • From July 2023, the Government’s Cheaper Child Care and Paid Parental Leave changes will take effect.
  • The Government is investing in affordable, high-quality health care for women and girls. The government will support research and data collection for women and girls’ health outcomes and will make it cheaper to test for the risk of recurrent breast cancer.
  • $589.3 million for women’s safety, which includes supporting implementation of the National Plan to End Violence Against Women and Children 2022-23 that builds on the $1.7 billion provided in the October Budget. This includes $194 million for a dedicated Aboriginal and Torres Strait Islander Action Plan, as well as $68.6 million over 2 years to support the Family Violence Prevention Legal Services providers to deliver legal and non-legal support for First Nations victim-survivors of family, domestic and sexual violence.


  • Increase to the maximum rates of Commonwealth Rent Assistance by 15% at a cost of $2.7 billion over 5 years.
  • Renters’ rights to be enhanced through the National Cabinet commissioned reforms to strengthen renters’ rights.
  • Encouraging build-to-rent by reducing the withholding tax rate for eligible fund payments from managed investment trusts attributed to newly constructed build-to-rent developments from 30 to 15%.
  • Encouraging build-to-rent by increasing the capital works tax deduction rate from 2.5% to 4% per year, increasing the after-tax returns for newly constructed build-to-rent developments.
  • Investing in social and affordable housing with an increase to the National Housing Finance and Investment Corporation’s liability cap by $2 billion to a total of $7.5 billion.
  • Expanding eligibility criteria of the Home Guarantee Scheme and Regional First Home Guarantee to any 2 eligible borrowers beyond married and de facto couples, and non-first home buyers who have not owned a property in Australia in the preceding 10 years, including for Australian Permanent Residents.

Childcare and Parental Leave

  • $72.4 million to build and support the skills of early childhood education and care workforce
  • From 1 July 2023, Parental Leave Pay and Dad and Partner Pay will combine into a single 20- week payment with a new family income test of $350,000 seeing an additional 3,000 parents eligible.
  • Commitment to increase Paid Parental Leave to 26 weeks by 2026.


  • $200 million to support projects that improve Australia’s resilience against natural disasters. Additional allocations under the government’s 5-year $1.1 billion dollar commitment to the National Heritage Trust to protect threatened species and habitats.
  • $262.3 million for Commonwealth National Parks.
  • $1 billion in additional funding for biosecurity.


  • Funding for a further 300,000 TAFE and vocational education training places to become fee- free.
  • The Australian Skills Guarantee will set national targets for apprentices plus specific targets for women apprentices and trainees on major Government-funded construction and ICT projects. These targets will aim to double women in apprenticeship and traineeship roles in construction projects, and triple trade apprenticeships roles by 2030.
  • $9.3 million, on top of $328 million previously announced for the National Teacher Workforce Action Plan. These investments are designed to attract, train and retain people in the teaching profession.
  • $40.4 million to improve school attendance, engagement and learning outcomes for students in Central Australian schools.
  • $38.4 million to pilot community-led and culturally appropriate distance learning models in remote locations.
  • $21.6 million will extend the Indigenous Boarding Providers grants program for one year.


  • Allocating around 70% of places in the 2023–24 permanent Migration Program to skilled migrants.
  • An extra 2 years of post-study work rights to Temporary Graduate visa holders with select degrees, to improve the pipeline of skilled labour in key sectors.
  • Increasing the Temporary Skilled Migration Income Threshold to $70,000.
  • Exempting international students working in the aged care sector from the capped fortnightly work hour limit until 31 December 2023.
  • Additional training places for Pacific Australia Labour Mobility scheme workers in priority sectors for the Pacific and Timor-Leste and where there are job shortages in Australia. Re-scoping 2 Skills Assessment Pilots to provide onshore migrants with fast-tracked skills assessments, free employability assessments, and access to further training.
  • Mechanism for the Mutual Recognition of Qualifications will ensure students from India and Australia will have greater certainty that the qualifications they attain will be recognised by both countries.

Aboriginal and Torres Strait Islander Communities

  • $250 million to deliver the plan for A Better, Safer Future for Central Australia. In partnership with local First Nations communities, the Government will work to address the decline in services and investments in the region over the past decade.
  • $1.9 billion over 5 years from 2022–23 to help closing the gap by delivering sustained, practical actions to improve the lives and economic opportunities of Aboriginal and Torres Strait Islander people.

The above budget initiatives have the potential to deliver benefits to you depending on your financial situation, personal circumstances and stage in life.

Please contact us if you would like to discuss any of this further.

As usual, we are looking forward to continuing to assist you confirm the important financial strategy areas relevant to you and provide advice to maximise your outcomes in the long term future.

As global economies adjust to the withdrawal of trillions of dollars of stimulus post-Covid, inflation is remaining stubbornly high alongside ongoing conflict in Ukraine, elevated energy and commodities prices and China’s reopening from Omicron BF.7.

Wuhan -- Hankou station after lockdown

Central banks around the world are continuing to raise interest rates in an attempt to contain inflation. The US is leading the way as the Federal Reserve Chairman continues to hold a firm line against higher prices and persistently strong employment & wages growth. Australia’s Reserve Bank is on a similar path but to a lesser degree, given that the US is doing some of the heavy lifting for Australia as it slows global growth overall.

The pressing questions on everyone’s lips are:

  • How high will interest rates go?
  • Are we heading into a recession?
  • Will it be a soft or hard landing?
  • Are we already in a recession?

As long as core inflation stays above the major central banks’ target levels (typically 2-3%), there are likely to be several more interest rate increases interjected with a pause or two across the 2023 calendar year.

Whether interest rates continue to rise, stay level or even drop again beyond 2024 is unknown depending on economic data, the lag effect and the answers to the questions above.

Professional economists are forecasting the possibility of a recession at a higher rate than anytime over the past decade and Google searches of the word “recession” hit an all-time high in 2022.  A key indicator for an impending recession is a sustained period of ‘yield curve inversion’, which is where short term Government bond rates (2 yr) are higher than the long term (10 yr) rates. This has been the case in the US since the end of last year and points to economic growth slowing in the longer term, more than in the short term, and a pending recession.

The Good News

If a recession does come, it will happen with a backdrop that includes a historically strong employment market, which would hopefully bring about a less severe, shallow recession. In Australia’s case we also have an abundance of natural resources that the world needs and we are benefiting from higher commodity prices and the strong US dollar. This may assist us avoid a technical recession altogether i.e. two consecutive quarters of negative economic growth. However, this remains to be seen and will also depend a lot on what happens in the US and other major economies around the world.

feather making a soft landing

The employment market is only one piece of evidence that counters the recession narrative. There are others as well, which include:

  • LVMH (parent company of Louis Vuitton, Tiffany & Co, Fendi) reported record numbers in the first nine months of last year. Consumers are spending aggressively on luxury items.
  • Airline fares, up 28% versus last year represent the second fastest growing category in the inflation index (behind fuel oil), and travel demand has soared despite the cost.

arrow with slight upward trend held in hands

Lagging Data

These results do not necessarily feel like a recession. However, we note that the data is lagging and captures what has already happened. It’s possible the environment could be much different six months from now, emphasising that it’s not possible to predict outcomes, but that taking a long-term view is key to being adequately prepared.

From an investment standpoint, we take solace in the fact the stock market and economic cycle don’t move in unison. The worst performance of the stock market is usually observed in the 12 months leading up to a recession rather than during the recession itself. There have been exceptions, but markets generally tend to be forward-looking while economic data is backward-looking.

Stunning sunset on a beach in Thailand

Let’s not forget lessons from recent history. Only two years ago we had an economic deterioration while the stock market moved higher. It’s certainly possible the same thing could happen again this year.

We are hopeful 2023 will be a smoother ride than 2022. But we are confident that together, we can navigate whatever the future holds, and we look forward to supporting you throughout the journey.

As usual, please contact us if you would like to discuss any of the above in relation to your circumstances, your financial advice and strategy areas, or your structures and investments.

We wish you a safe and happy break, and look forward to new beginnings in 2023.

We have prepared an end of year wrap up video. Please click on the image below to view it.

As part of our tradition, Fintech Financial Services (Fintech) has made a donation to the ‘Beyond’ (Anxiety, depression and suicide prevention support – Beyond Blue) on your behalf – instead of sending Christmas cards in the mail. Red Cross support the most vulnerable people in our local communities here in Australia and across the Asia Pacific.


Business Hours Over the Holiday Season
Closed: Friday 23rd December 2022
Re-opening: Monday 9th January 2023


For any urgent matters during this period, please call mobile 0419 833 777.

The team at Fintech sincerely wish you a safe, happy and fun holiday period.

We look forward to working with you in 2023 and beyond.

Merry Christmas

Balancing a revenue windfall, pre-election promises, structural spending demands & persistent inflation pressures


The Labor Government under Anthony Albanese has implemented its election policies and expects lower budget deficits in the next two years thanks to increased tax revenues from higher commodity prices and other savings.

However, future years are expected to bring significant deterioration to the economy as structural spending pressures, higher interest rates and lower productivity impact growth. As the Treasurer Jim Chalmers foreshadowed, this is largely a “bread and butter” budget with no changes to personal income tax rates. Any other significant reforms being planned by the Labor Government across income tax rates or superannuation were not addressed in this budget and if they are applicable could be announced in next year’s 2023 Federal Budget in May.


  • Yet another revenue windfall from high commodity prices and the offsetting of new spending with the savings, has resulted in sharply lower budget deficits over the next 2 years (the deficit this year has been revised down to $36.9bn from $78bn forecast in March 2022). This avoids adding to inflation and the pressure on the Reserve Bank of Australia (RBA) to keep raising interest rates.
  • Budget deficit projections are now worse beyond 2024-2025 and will most likely lead to the Treasurer Jim Chalmers looking for was to increase fiscal (tax) revenues or cut spending in next May’s budget.
  • There has been a realistic attempt to highlight the structural pressure on the budget whilst focussing on the cost of living pressures affecting less affluent Australians.
  • The economic assumptions used in the budget look reasonable and Australia’s public debt remains low compared to other comparable countries, which will assist the Government retain its triple A credit rating.
  • Commodity price assumptions used in the budget remain well below current levels and so could be a source of surprise to reduce the deficit further.

Key proposals

  • Reducing eligibility age for Downsizer Contributions from 60 to 55.
  • Increasing Commonwealth Seniors Health Card income thresholds.
  • Allowing pension age social security recipients to earn more from employment before their payment is impacted.
  • More generous eligibility rules for Child Care Subsidy and Parental Leave Pay.
  • More favourable Centrelink assessment of home sale proceeds.
  • Continued support for homebuyers, and
  • Increased funding for the National Disability Insurance Scheme (NDIS).

Please note: The announced changes are proposals only and may or may not be made law.
The successful implementation of the measures will require successful negotiation through the Senate where the Government does not hold a majority. Therefore, The final version of these measures may differ from the current announcements.

albanese-chalmers photo



Personal Taxation

  • No changes to personal income tax: The Budget did not contain any measures announcing changes to personal income tax. This includes:
    • No changes to the Stage 3 tax cuts (announced by the former Liberal Government) which are still tabled to take effect from 1 July 2024, and
    • No extension of the Low and Middle Income Tax Offset, which ended 30 June 2022.
  • Helping enable electric car purchases: For purchases of battery, hydrogen, or plug-in hybrid cars with a retail price below $84,619 (the luxury car tax threshold for fuel efficient vehicles) after 1 July 2022, fringe benefits tax and import tariffs will not apply. Note: Employers will still need to account for the cost in an employee’s reportable fringe benefits.

No changes to personal tax rates and thresholds

personal-tax-rates chart

Home Ownership

  • Housing affordability measures: A key focus of the Budget were measures to help individuals secure housing. This is expected to occur largely via the Housing Accord – which will bring Federal, State and Local Governments together to work on housing affordability and homelessness. Measures announced include:
    • A commitment to the ‘Help to Buy’ scheme which will support first home buyers to buy a home with the Federal Government being a part owner, resulting in a lower balance to be funded by the individual themselves.
    • A Regional First Home Buyer Guarantee from 1 October 2022 which, similar to the existing First Home Deposit Guarantee scheme, is expected to provide up to 10,000 first home buyers with a guarantee over their mortgage, removing the need for lenders mortgage insurance


  • Expanding eligibility for the Downsizer Contribution: Legislation has been introduced to reduce the Downsizer Contribution eligibility age from 60 to 55 years of age. This measure will allow more people to make a further contributions of up to $300,000 each to their Superannuation after selling their family home owned for more than 10 years. The measure is proposed to take effect from the first quarter after passing into law, which is expected to be 1 January 2023.
  • SMSF and tax residency: The Government confirmed its intention to continue with the 2021/22 Budget measure of extending the temporary trustee absence period from two years to five years and removing the ‘active member’ test. These changes will help SMSFs continue to maintain their Australian tax residency even while members are overseas, and allow them to continue to contribute to their funds even if they become non-tax residents.
  • Three-year audit cycle for SMSFs not proceeding: Originally announced as part of the 2018/19 Budget, it was confirmed the current Government will not proceed with this measure.

Social Security

Childcare subsidy graph

  • Child care subsidy changes: As part of a package of reforms to encourage parents to return to the workforce, the maximum child care subsidy from 1 July 2023 will increase to 90% for families earning less than $80,000. For every $5,000 earned over this threshold the subsidy will reduce by 1% – reducing to zero for incomes $530,000 or above. The higher rate of subsidy for families with multiple children in care will continue under its current arrangements, ceasing once the eldest child reaches six years old or has been out of care for 26 weeks.
  • Paid parental leave increases: Announced before the Budget, from 1 July 2024 the Paid Parental Leave Scheme will increase the maximum period of leave by two weeks each year – reaching a maximum of 26 weeks by 1 July 2026. Further, from 1 July 2023 both parents will be able to access leave at the same time or enter into more flexible arrangements than currently available under the limited Dad and Partner Pay limits, and requirements to take 12 weeks as a continuous period. The paid parental leave income test will also be extended to include a $350,000 family income test, which can be used to help families who do not meet the individual income test.
  • Reducing assessment of former home proceeds: For individuals on social security benefits, the temporary assets test exemption of home sale proceeds is to be extended from 12 months to 24 months. Additionally, these proceeds will only be deemed to earn a return at the lower deeming rate (currently 0.25% per annum) for this period. Note: This exemption only applies to the portion of the proceeds expected to be used in a new home purchase.
  • Work Bonus deposit for older Australians: Announced as an outcome from the Jobs and Skills Summit, age pensioners and veterans over service pension age are expected to receive a one-off credit of $4,000 into their Work Bonus income bank. The Work Bonus typically offsets $300 per fortnight of income earned from employment or self-employment activities, allowing pensioners to receive a higher age pension whilst still working.
  • Increased income thresholds for Commonwealth Seniors Health Card: The Government has committed to increasing the income thresholds to qualify for the Commonwealth Seniors Health Card from $61,284 to $90,000 for singles, and from $98,054 to $144,000 combined for couples. This measure creates an opportunity for more senior Australians to access reduced costs for healthcare, pharmaceuticals, utilities and transport and more.
  • Deeming rate freeze: The Government has also confirmed its intention to retain the current deeming rates until at least 30 June 2024.
  • Plan for cheaper medicines: From 1 January 2023, the general patient co-payment for Pharmaceutical Benefits Scheme treatments is expected to reduce from $42.50 to $30.

Implications for asset classes and investments in Australia

  • Cash and term deposits: Returns on Cash accounts are improving thanks to the current RBA interest rate hikes but still remain historically low. Term Deposits rates being paid by some banks for longer terms such as 12 Months, are becoming more attractive at 3.8% and higher levels.
  • Bonds: The RBA has hiked interest rates rapidly from 0.10% to 2.60% since April 2022, and are widely expected to increase rates further in November and December 2022 by 0.25% or 0.50% before pausing early in early 2023.
    • The need to keep increasing rates is due to persistently high inflation, full employment and overheating markets following the trillions of dollars of stimulus injected into the economy along with interest rate cuts following the breakout of the COVID-19 pandemic in early 2020.
    • Further rate hikes and forecast budget deficits (albeit deficits may now be lower than expected) will continue to add upwards pressure to bond yields in the near term.
    • Investors who purchased fixed rate and long duration bonds purchased before the recent interest rate increases have lost capital value in those bonds. In fact, bonds have dropped over -12% in the last 6-9 months. Bond markets are reaching the peak in this cycle and have now pricing in yields around 4% (compared to 0.20% 6 months ago).
    • As the impacts of higher interest rates and other Government austerity measures are felt, inflation and the economy growth will start to show more signs of contraction. Current bonds yields at around 4% and higher are becoming attractive in anticipation of this, and we are positioned to take advantage of buying opportunities as they arise for your portfolio.
  • Shares: The budget is positive for childcare and construction companies but beyond that there is not really a lot to impact the share market. However, we are continuing to focus on high quality Australian and International companies that have strong competitive positions in their markets, resilient earnings, positive cash flows and low levels of debt.
  • Property: The confirmation of more homebuyer schemes and more immigrants offset by long term housing supply measures in the budget are unlikely to alter the dominant negative impact of rising mortgage rates in driving a cyclical downturn in home prices into 2023.
  • The Australia Dollar (AUD): the Budget is unlikely to change the direction for the AUD, particularly against the strong USD as inflation remains high and the US Federal Reserve continues to hike interest rates.

The above budget initiatives have the potential to deliver benefits to you depending on your financial situation, personal circumstances and stage in life. Please contact us if you would like to discuss any of this further.

As usual, we are looking forward to continuing to assist you confirm the important financial strategy areas relevant to you and provide advice to maximise your outcomes in the long term future.


As the post-pandemic economic recovery continues to take shape, Australian Federal Treasurer Josh Frydenberg has handed down the 2022-23 Federal Budget

Among the proposed changes, the Morrison Government has announced a pre-election cash splash and plans for lower budget deficits in the coming years.

The additional spending relates mainly to this calendar year, and given the stronger than expected economy it looks to be more motivated by politics than economics. “Fiscal repair” kicks in for the medium-term but this takes the form of restrained spending growth in contrast to the last two budgets, rather than austerity. Despite this, the Government is able to announce lower budget deficit projections thanks to a windfall from faster growth and higher commodity prices which is resulting in faster tax collections and lower welfare spending.

Key points

  • A budget windfall has allowed both more spending and projected lower budget deficits, with the 2022-23 budget deficit expected to be $80bn (down from $99bn in December 2021).
  • Key measures include one-off “cost of living” payments, a temporary cut to fuel excise, more spending on infrastructure & defence, more help for home buyers, and the continuation of the 50% reduction in minimum Pension drawdown rates from superannuation.
  • Relying mainly on nominal economic growth to reduce the deficit and debt, the Government runs the risk that it could take a very long time to get back to budget surpluses and repay the almost $1 Trillion debt to a reasonable level.

Economic assumptions

  • The Government revised up its growth forecasts for this financial year (from 3.75% to 4.25%) and kept 2022-23 GDP growth unchanged at 3.5%.
  • Unemployment is expected to fall to 3.75% by June 2023 (down from 4.25%).
  • Inflation and wages forecasts have also been revised up significantly.
  • Net immigration (estimated to be +41,000 this year rising to +235,000 by 2025-26) becoming more of a growth support.
  • The Government pushed out its $US55/tonne iron ore price assumption to September quarter 2022. While iron remains around $US135/tonne, it is a source of revenue upside.

Table of Economic Assumptions for Real GDP - Inflation - Wages - Unemployment

Read on for a round-up of how the proposals might affect your household expenses and financial future.

Remember, many of these proposals could change as legislation passes through parliament.


Temporarily extending the minimum Pension drawdown relief

Proposed effective date: 1 July 2022

The temporary reduction to the minimum income drawdown requirement for superannuation Pensions will be further extended until 30 June 2023.

This will allow people to minimise the need to sell down assets given ongoing market volatility. It applies to account-based, transition to retirement and term allocated superannuation Pensions.

For the 2022-23 financial year, the proposed minimum Pension drawdown will be:

Table showing the proposed minimum pension drawdown



  1. Temporarily cutting fuel excise

    Proposed effective date: 30 March 2022
    Fuel excise will temporarily be cut by half, or 22.1 cents per litre, to save families an estimated $30 a week. This measure will end on 28 September 2022.

  2. Increasing the Low and Middle Income Tax Offset (LMITO)

    Proposed effective date: 1 July 2021

    • The LMITO will be increased to up to $1,500 for the 2021-22 financial year. All eligible LMITO recipients will benefit from the full $420 increase, referred to as the Cost of Living Tax Offset.
    • The benefit for those earning up to $37,000 will be $675 (currently $255).
    • For those earning between $37,000 and $48,000, the offset will increase at the rate of 7.5 cents per $1 above $37,000 to a maximum of $1,500 (currently $1,080).
    • Those earning between $48,000 and $90,000 are eligible for the maximum LMITO benefit of $1,500 (currently $1,080).
    • For income above $90,000, the offset phases out at a rate of 3 cents per $1 and is not available when taxable income exceeds $126,000.
    • The LMITO is due to end on 30 June 2022 and has not been extended.
    Personal tax rates, thresholds and offsets
    Table showing Personal Tax rates and Thresholds

    The Low Income Tax Offset (LITO) remains unchanged at $700 and will be reduced at a rate of:
    — 5 cents per $1 for income between $37,500 and $45,000, and
    — 1.5 cents per $1 for income between $45,000 and $66,667.
    Effective tax-free threshold (2021-22) with LMITO and LITO:
    — $25,437 for individuals below Age Pension age (some Medicare levy may be payable).

  3. Increasing the Medicare levy low-income thresholds

    Proposed effective date: 1 July 2021
    Low-income taxpayers will generally continue to be exempt from paying the Medicare levy.
    — Singles will be increased from $23,226 to $23,365
    — Families will be increased from $39,167 to $39,402
    — Single seniors and pensioners will be increased from $36,705 to $36,925
    — Families (seniors and pensioners) will be increased from $51,094 to $51,401.
    For each dependent child or student, the family income thresholds increase by a further $3,619.

Social security, families and aged care

  1. Introducing a one-off cost of living payment

    Proposed effective date: 28 April 2022 onwards

    To help with higher cost of living pressures, the Government will provide a one-off tax-free payment of $250 to Australians who receive qualifying social security payments or hold eligible concession cards, including:
    — Age Pension
    — Disability Support Pension
    — Carer Payment
    — Carer Allowance Jobseeker Payment
    — Pensioner Concession Card holders
    —  Commonwealth Seniors Health Card holders.

    An individual can only receive one payment, even if they’re eligible for multiple benefits or concession cards.

  2. Enhancing the Paid Parental Leave scheme

    Proposed effective date: 1 July 2023

    Currently, the Paid Parental Leave scheme is made up of two payments for eligible carers of a newborn or recently adopted child:
    — Parental Leave Pay of up to 18 weeks at a rate based on the national minimum wage.
    — Dad and Partner Pay of up to 2 weeks at a rate based on the national minimum wage.

    The Government plans to create a single scheme of up to 20 weeks, fully flexible and shareable for working parents within two years of their child’s birth or adoption. Single parents will also benefit from the extended 20-week entitlement.

    The income test will also be broadened. Parents who don’t meet the individual income threshold (currently $151,350) can still qualify for payment if they meet a family income threshold of $350,000 a year.

  3. Lowering the Pharmaceutical Benefits Scheme (PBS) threshold

    Effective date: 1 July 2022

    The Government will reduce the PBS safety net thresholds to support people who have a high demand for prescription medicines due to their health needs.

    This means approximately 12 fewer scripts for concessional patients and 2 fewer scripts for general patients a year.

    On reaching the PBS safety net, concessional patients will receive their PBS medicines at no cost for the rest of the year, and general patients will pay the concessional co-payment rate (currently $6.80 per prescription).

Housing Affordability

Expanding the Home Guarantee Scheme

Proposed effective date: 1 July 2022 or 1 October 2022 depending on the specific scheme

The Home Guarantee Scheme allows first home buyers to build or purchase a newly built home with a low deposit, replacing the need for commercial lenders’ mortgage insurance.

The Government is expanding the scheme to make available:
  • 35,000 guarantees each year (up from the current 10,000) from 1 July 2022 under the First Home Guarantee, to support eligible first homebuyers to build or purchase a newly built home with a deposit as low as 5%.
  • 10,000 guarantees each year from 1 October 2022 to 30 June 2025 under a new Regional Home Guarantee, to support eligible homebuyers (including non-first home buyers and permanent residents), to purchase or construct a new home in regional areas with a deposit as low as 5%.
  • 5,000 guarantees each year from 1 July 2022 to 30 June 2025 to expand the Family Home Guarantee. This program enables eligible single parents with dependants to enter or re-enter the housing market with a deposit as little as 2%.

Eligible first home buyers may also be able to take advantage of the First Home Super Saver Scheme which allows them to use the concessionally taxed super system to save their first home deposit. Other federal and state grants and stamp duty concessions may also be available.

Assessment and summary

This is very much a pre-election Budget with few direct losers (e.g. tax avoiders) and lots of winners – including low and middle income taxpayers, welfare recipients, motorists, first home buyers, parents with young children, older super members, apprentices, builders, small business owners, defence industries, transport users, tourism operators, and even Koalas.

The Budget has a number of things to commend it:
  • Medium term structural spending is no longer being ramped up faster than the economy.
  • Most of the budget windfall from stronger growth and higher commodity prices is being put to deficit reduction and hence long-term debt stabilisation (unlike last year when it was mostly spent), and
  • The annual addition to infrastructure spending along with measures like the Apprenticeship Incentive Scheme will provide some boost to productive potential.
However, at a micro level the Budget may be criticised on the grounds that:
  • The temporary fuel excise reduction is bad economic policy in that, it may be very hard to reverse if oil prices keep rising or stay high, it will make no sense if oil prices fall back on say a Ukraine peace deal, and it sets a bad precedent.
  • Many welfare recipients are arguably getting compensated for “cost of living” pressures twice – via the one of payment and via the indexation of payments to inflation, and
  • The housing measures continue to focus more on demand than supply which will result in higher than otherwise home prices (even though they are unlikely to prevent the cyclical downturn in prices now starting) and will boost debt levels.
At a macro-economic level there are two big risks flowing from the Budget:
  1. Firstly, the pre-election cash splash (which is about 1% of GDP in terms of new stimulus in the Budget for this calendar year, but is actually a bit more if spending of the $16bn in “decisions taken but not yet announced” in the Mid-Year Economic and Fiscal Outlook (MYEFO) are allowed for) risks overstimulating the economy at a time when it is already strong, further adding to inflationary pressures and adding to the amount by which the Reserve Bank of Australia (RBA) will have to hike interest rates, and
  2. Secondly the reliance on growing the economy to reduce the budget deficit and debt is unlikely to reduce debt quickly enough and is dependent on interest rates remaining low relative to economic growth. 10-year bond yields have already gone up more than four-fold since their 2020 low warning of a sharp increase in debt interest payments beyond the medium term. And economic growth is unlikely to be anywhere near strong enough to reduce the debt burden like it did in the post-WW2 period unless there is another immigration boom or 1980s style focus on boosting productivity – both of which look unlikely. In the meantime, the strategy would be highly vulnerable if anything came along to curtail the commodity boom. So at some point tough decisions are likely to be required either to reduce spending as a share of GDP or raise taxes.

Implications for the RBA

It is now likely that the RBA will start raising interest rates in the period June to August 2022, with the cash rate expected to reach 0.75% – 1.00% by year end and 1.50% – 1.75% in 2023. The extra stimulus in the Budget increases the chance that the first rate hike will be 0.40% rather than 0.15% (taking the cash rate to 0.50% after the first increase).

Implications for Australian Assets

  • Cash and Term Deposits – Cash returns are poor but they will start to rise as the RBA starts hiking from mid-year.
  • Bonds – Ongoing budget deficits add to upwards pressure on Bond yields. Where the rising trend in yields results in capital loss, total Bond returns (income + capital) will remain low for the medium-term.
  • Shares – More fiscal stimulus (tax breaks), strong growth and relatively low interest rates all remain supportive of Australian shares. However, rising Bond yields and RBA rate hikes will result in a more constrained and volatile ride.
  • Property – More home buyer incentives are unlikely to offset the negative impact of poor affordability and rising mortgage rates in driving a cyclical downturn in home prices.
  • The Australian Dollar (AUD) – Strong commodity prices point to more upside.

As always, please contact our office if you would like to discuss any of the above in relation to your specific circumstances.


Key Takeaways

  1. The rapid escalation between Russia and Ukraine has dramatically shifted investor sentiment. We are witnessing a meaningful setback in key financial markets, prompting volatility and negative speculation. This is normal amid uncertainty, but it is worth stepping back to understand the fundamentals of the situation.
  2. A wide range of potential scenarios and outcomes are possible from here. Your portfolios are highly researched and diversified to minimise risk, and we should try to avoid predicting every possible pathway and instead look at the potential implications across assets.
  3. Energy prices are an area we believe will be vividly impacted.
  4. Russian stocks only account for around 2.9% of the emerging-markets basket . So, while the local market reaction has been severe, the numbers don’t argue for a significant long-term impairment across other emerging markets.
  5. During wars and conflicts, the historical track record of the equity market is mixed, with some conflicts such as the Crimea invasion in 2014 leaving equity markets barely changed. Those with a long time horizon will likely be well placed staying invested, statistically speaking.

Setting the scene – Why Russia/Ukraine Concerns Matter

The Russian invasion of Ukraine is increasingly fluid and potentially harrowing. As investors – not as politicians or news reporters – we thought some perspective on the investing implications from a multi-asset perspective is warranted.

As a client of Fintech Financial Services, you will be aware that we are advocates of long-term investing where it can be aligned to your goals and aspirations. Inherently, we believe it is important in situations such as this to keep one’s bearings and not lose a long-term perspective. Unsettling headlines can lead to fear, which in turn can lead to sub-optimal decisions, which in turn can undermine long-term return objectives. Understanding what is important to you and staying focused on the ‘financial advice & strategies’ that will achieve those things in the long term is the key.

At the same time, we can’t just ignore risks. As fundamental investors, we believe it is important to assess and understand any potential long-term market implications from this type of potential conflict. While there are certain impacts that are relatively clear and mostly well understood by market participants, there are also other less obvious impacts that need to be assessed.

Furthermore, it is important to be alert and prepared during periods of uncertainty, as short-term fluctuations and volatility can uncover potentially significant investment opportunities at attractive valuations.

First-Level Impacts: Energy Markets Must be a Primary Focus

It is fairly clear that the Russia/Ukraine conflict has potentially significant energy market implications. This is particularly true in European natural-gas markets, which are supplied mostly by way of imports from Russia. Russia also is a significant player in global oil markets, and speculation around the price impact from curtailed supply out of Russia has already embedded a “geopolitical risk premium” into oil prices.

Gazprom signage

As well, to the extent that the sanctions imposed increase in severity, there could be significant incremental friction imposed upon an already stressed global supply chain, which in turn could exert more significant inflationary pressures in other commodities that Russia supplies to the world. Between Russia and Ukraine, the two countries account for 25% of global wheat exports, and Ukraine is responsible for 13% of corn exports , so food inflation is a major risk. Additionally, Russia is the largest producer of ammonium nitrate and is a large exporter of palladium, platinum, and aluminum.

In an environment of rising global inflation, this increases the pressure on central banks globally to tighten monetary policy. Specifically, central banks may feel compelled to act in order to dampen inflationary pressures, most likely through increases in policy rates (including interest rates). In the event that rates reset higher, this generally represents a headwind for fixed-income investments – all else being equal – particularly in developed markets.

Equity markets, while certainly volatile of late, will be impacted differently. As sanctions are now imposed on Russia by western countries at scale, the Russian economy and equity market could weaken further. We’ve already seen the MSCI Russia Index (a favored index for Russian stocks) fall by more than 60% year-to-date in 2022 .

Elsewhere, the prospect of accelerating inflation in developed-market economies may come with cost-of-capital implications, especially for longer-duration growth equities (such as the big technology names with lofty valuations), which may not yet be fully priced in. And, of course, there are potential beneficiaries, such as global energy companies who could benefit from an extended period of elevated energy prices.

Exhibit 1 Energy Stocks are Clear Outperformers in Global Equity Markets Year-to-Date

Exhibit1-2 Graph


Energy Market Implications Will be Felt Most in Europe

Russia (and more broadly the other so-called “Commonwealth of Independent States,” or CIS) is an important supplier of energy to the world. With production of 14.7 million barrels per day , Russia met 16% of the world’s petroleum (oil and refined products) needs and on this basis is the world’s second-largest producer behind the United States. At 679 billion cubic meters per year, Russia produces 17% of the world’s natural gas, and again is the world’s second-largest producer, behind the United States.

Exhibit 2  Russia Share of Commodity Production is Meaningful

Exhibit2-2 Graph


Perhaps most importantly, Russia looms largest as an energy supplier to Europe. Including other CIS countries, Russia supplied approximately 43% of Europe’s imported oil and petroleum products, as well as around 56% of Europe’s imported natural-gas supply, in 2020[1]. Moreover, approximately 33% of gas supplied by Russia to Europe is transported through Ukraine. The key message here is simple: when conflict bubbles up between Russia and Ukraine, energy markets take note.

The trouble spot is clearly Europe. The region has become increasingly reliant on imported energy supply as a combination of policy initiatives, regulatory-driven supply curtailments and a lack of investment in local conventional-energy supply growth. Together, this has conspired to cause local energy supply to shrink in recent years. With global-energy prices substantially rising through 2021 and into 2022, the aforementioned local-supply issues in Europe served to exacerbate the local vulnerabilities, leading to substantially more rapid increases in European energy prices than those experienced globally.

The Impact of Sanctions and Potential Knock-On Effects

How Russia reacts to sanctions, and how the rest of the world reacts to Russia’s reaction, could significantly impact energy markets. It is possible, even likely, that in response to sanctions, Russia may restrict energy supplies in an attempt to exert geopolitical leverage on the West.

As well, it is entirely possible that there could be damage inflicted on Ukraine’s gas infrastructure, as well as potential restriction of gas supplies through other European pipelines, such as Yamal and the controversial Nord Stream 1.

The United States has been working to source additional gas supplies (predominantly liquefied natural gas or LNG) into Europe. However, while there may be enough gas to mitigate losses from Ukraine, it is unlikely that there is enough spare LNG capacity to compensate for other pipelines being cut off.

There is also a risk that Russia will seek to restrict its oil exports. This brings in other oil exporting countries, who may or may not offset any oil-supply cuts. For example, to date, Saudi Arabia has shown no indication that they are willing to backfill this void. In response to such a curtailment, the International Energy Agency could help coordinate a release of oil supply from various strategic petroleum reserves to help offset the supply shortfall, but this is far from guaranteed. Bear in mind, as well, that progressions in negotiations around reinstatement of the Iranian nuclear accord could eventually bring additional barrels from Iran onto the oil market, but this deal is by no means a lock, either.

Inflation Thoughts: It Could Get Worse Before It Gets Better

Severe sanctions are already being imposed against Russia, but this could get worse – and may add to preexisting inflation pressures. The potential sanction list below is far from exhaustive, but it could foreseeably include sanctioning the three largest Russian banks (VTB, Sberbank, and Gazprombank), removing Russia from SWIFT, or sanctioning exports of critical technology and members of Putin’s inner circle, among others.

Russia’s response to these sanctions could prompt an increased risk of inflation. This is likely to include disruption of critical energy, food, and industrial commodities. By some estimates, these disruptions could add up to 2% extra headline inflation in developed markets, most notably in Europe[1]. This, in turn, could potentially serve to give further impetus to accelerated tightening of monetary policy, given the inflationary backdrop and already hawkish signals from central banks. On the other hand, there is a chance that rate hikes could be delayed to buffer against economic uncertainty, plus fiscal spending could be loosened to cushion the blow to real incomes.

Digging into some of the details, we see that the energy component of the inflation calculation varies from region to region. In the US consumer price index (CPI), as an example, energy price changes accounted for 7.5% of the index in late 2021[2]. That doesn’t seem all that significant; however, we can see that when energy prices rise substantially, as they did in the January 2022 CPI report, this can significantly influence the overall inflation number. In this report, energy-price increases of over 25% year-over-year contributed close to a 2% CPI change, which was over a quarter of the 7.5% year-over-year change in the index.

Fixed Income Implications: The Defensive Ballast Requires Extra Care

Inflation tends to erode real returns, and rising policy rates (deployed in an effort to offset inflation) tend to negatively impact bond pricing, creating a “double-whammy” of sorts for fixed-income investors.

However, in this instance, there are some important and potentially offsetting considerations. Generally, increases to policy rates tend to be driven by an economy that could sustain higher rates. If central banks sense a vulnerability in the economic environment, they may act conservatively and decide to pause on rate hikes. Certain fixed-income markets should benefit from that.

Even if central banks do raise rates in line with market consensus to halt inflation, fixed-income investors would benefit from reinvestment of coupons at higher rates in the new higher-yield regime, so the impact from any price loss due to yields moving higher is mitigated to some extent.

Russian Equity Implications: A Dangerous Place, But a Small Slice of Emerging Markets

Among stocks, let’s first take a direct look at Russian equities. Of note, Russia accounts for less than 3% of the Emerging Market Index, so we do not expect a significantly long-term impairment to this basket. But more pointedly, the performance of the Russian equity market is back to its early-2016 lows, having fallen over 60% from its 2021 high[3]. This is a clear signal from investors regarding the significance of this situation. For perspective, the Russian index last reached those levels in 2016 primarily due to the fall of oil prices, but also due to the impact of sanctions imposed after Russia annexed Crimea.

Note that from the 2016 lows, through the peak in 2021, the Russian index price level increased 160%, and the total return was 265%, compared to total returns for the MSCI World of 130%, and the MSCI Emerging Markets index of 107%. This time period was obviously cherry-picked, to the flattery of the Russian equity market, but the point is simple: buying into fear can be rewarding.

So, what is different this time? The current invasion is more significant in scale and magnitude than what occurred in 2014. This time around, the oil price is also strong, now over $100 per barrel, partly in response to Russia’s invasion. Let’s now consider the Russian equity market by looking at its largest constituents. The top ten stocks account for over 80% of the MSCI Russia index, so it is very concentrated. Sberbank, Russia’s largest bank, will be the target of sanctions itself. Assuming sanctions weaken the Russian economy, the banking sector is very likely to suffer with higher credit costs. Since October 2021, Sberbank is now down almost 90%, with a price to earnings (P/E) ratio of just 1x and a 50% dividend yield, so the market seems to be making a binary bet on Sberbank’s demise—with the odds stacked against it.

The three large Russian energy companies (Gazprom, Lukoil, and Rosneft) also comprise 35%-40% of the index. Higher oil and gas prices are typically a boon to these companies. However, the market also seems to be making a somewhat binary bet on these three, with P/E ratios between 2-3x and dividend yields between 20%-30%. Producing such a valuable commodity, these companies will likely find a market for their oil and gas eventually, should Europe no longer be a customer, but developing new markets would take time.

A final consideration for investors is that sanctions could involve the prohibition of investors to own securities of Russian companies. For instance, the US government has banned the US listing of certain Chinese companies over concerns of national security. It is not a stretch to imagine that a similar ban could be placed on American Depositary Receipts (ADRs), American Depositary Shares (ADSs), or Global Depositary Receipts (GDRs) of Russian stocks. Similarly, Russia could impose its own restrictions on foreign investment.

In short, Russian stocks are an extremely risky place to be, even at current prices. But thankfully they do not represent a meaningful exposure to the broader emerging-market basket globally.

Global Equity Market Implications: Sector Allocations to Play a Big Role

Turning to global equity markets, the US has experienced tough going in 2022 to date.

Exhibit 3 The US Investment Landscape in Early 2022 (Year-to-Date) is Ugly.

Exhibit3-2 Graph


The conflict between Russia and Ukraine has certainly had a meaningful impact on the collective market psyche, but it’s far from the only factor. Inflationary pressures, the tightening monetary policy, and a challenging earnings season have all weighed on sentiment. In particular, the past decade’s big winner, US large-cap growth equities, have experienced a significant setback, underperforming their large-cap value counterparts. Interestingly, non-US equities have out-performed US equities as well.

We say all this to illustrate that equity markets, while certainly volatile of late, will likely carry sector dispersion and are unlikely to be impacted equally. However, your portfolios remain overweight energy companies as we continue to see relative value in the sector.

A Final Takeaway for Concerned Clients

Finally, we’d like to close with a word on the benefits of long-term investing. Looking back through prior geopolitical events, we find that staying invested in line with your specific strategies gives you the highest probability of investing success to achieve your goals. That’s not to say the risks aren’t worthy of your attention – they definitely are – but carrying a diversified portfolio of undervalued assets should hold you in good stead over your investing lifetime.

Exhibit 4 A Short History of Geopolitical Events and Equity Market Movements.

Exhibit4-2 Graph


In this sense, the classic British statement emanating from World War II, “Keep calm and carry on,” seems quite appropriate to us as we view the investment case regarding the Russia-Ukraine conflict. A long-term approach to investing can help guard against unwise decisions overly informed by short-term fears. A fundamental, valuation-driven approach can help assess the opportunity set and potentially identify attractive opportunities.

As always, if you would like to discuss any of this in relation to your specific situation, please contact us.


1 Source RBC Capital Markets, February 2022
2 Sourced from Morningstar Direct as at 02/24/2022
3 Sourced from the International Energy Agency, 2019.
4 Also sourced from the International Energy Agency, 2019.
5 Sourced from BP Statistical Review of World Energy, 2021
6 Sourced Capital Economics, Goldman Sachs, JP Morgan, Morgan Stanley research reports, February 2022.
7 Sourced from Federal Reserve data, to 12/31/2021
8 Sourced using the MSCI Russia index from Morningstar Direct, to 02/24/2022.
9 Again, sourced from Morningstar Direct.


The Russia/Ukraine situation has intensified over the past few days. We can’t yet know the lasting effects, but we are staying focused on ensuring your financial strategies and investments are positioned to minimise risk and deliver your long term objectives.

This communication is to keep you up to date with our early observations regarding the Russian concerns and open a dialogue if you want to discuss your current position and ongoing financial strategies.


Perspective about the Ukraine/Russian situation

This geopolitical event is concerning on practically every level, leaving a wide range of potential outcomes and scenarios. Putting aside views on the way this might evolve, our role is to look at this financially and ensure you are secure. This requires us to avoid prediction and instead use multiple layers of thought.

  • Let’s start with the good news – your direct exposure to Russia and Ukraine is negligible. We do maintain exposure to emerging markets given the attractive valuations and diversification, but the weightings to Russia and Ukraine are small. For example, Russian companies only account for around 2.8% of the emerging market basket for equities and around 4.1% for bonds. Ukraine doesn’t even register on the factsheets because it is so small. (Perversely, if prices in these regions fall significantly, the expected reward for buying these markets might exceed the risk – creating a buying opportunity. However, that isn’t the case right now).
  • Moving to knock-on effects, the risks are more notable, but we do see some offsetting positives. Again, starting with the good news, the tensions are pushing commodity prices higher. This has supported sentiment toward energy companies, which have done very well for your portfolio of late. We also apply a long term, valuation-driven focus to your investments (preferring cheaper assets) which tend to do well in this kind of environment, so we have another ballast. That said, we can’t rule out an exodus of investor money if things deteriorate quickly i.e. people panicking and selling at the wrong time. We never expect straight lines in markets, and if negativity really takes hold, it could open a world of opportunity to add undervalued assets to your mix.

In case it wasn’t obvious from the above, we are monitoring this situation closely and hearing from a range of industry experts to understand the impact as it evolves. Ultimately, we are keeping a close eye on any consequential impacts and given everything we know (while acknowledging the unknowable), it reinforces the benefits of a long-term, valuation driven approach. In this regard, your investments remain well positioned to navigate this uncertain period, keeping you on the path to achieving what’s important to you in life.

If anything changes, we’ll be sure to let you know, but for now we hope you find this touchpoint useful.

As always, please don’t hesitate to contact us if you have any questions or issues.


We wish you a safe and happy break, and look forward to new beginnings in 2022.

We have prepared an end of year wrap up video. Please click on the image below to view it.

As part of our tradition, Fintech Financial Services (Fintech) has made a donation to Red Cross (Australian Red Cross) on your behalf – instead of sending Christmas cards in the mail. Red Cross support the most vulnerable people in our local communities here in Australia and across the Asia Pacific.


Business Hours Over the Holiday Season
Closed: Thursday 23rd December 2021
Re-opening: Monday 10th January 2022


For any urgent matters during this period, please call mobile 0419 833 777.

The team at Fintech sincerely wish you a very safe and happy holiday period.

We look forward to working with you in 2022 and beyond.

Merry Christmas

After a tough 2020 and the three day lock down in greater Brisbane just before Easter, we’ve been reflecting on what that means for you, your families and your financial strategies. Relatively speaking, we have been lucky here in Australia, but given the continued unpredictability of COVID-19, and the slow vaccine rollout, it’s perhaps wise to remember the lessons we’ve learned that will be worth holding onto through the rest of 2021 and beyond.

1.Markets are all about probabilities and risk management

Or let me say this more bluntly – investment markets cannot (unfortunately) be timed with precision – by you, me, or any other expert. Let’s say, hypothetically, we had anticipated there was going to be a global pandemic, avoiding the sharp declines in the global stock markets, as you decided to withdraw your investment(s). Even with this knowledge, it would have been extremely difficult to predict the timing and strength of the rebound in the market. In this case, the severe downturn has (in many instances) corrected itself within six months. Ultimately, you would likely still be sitting on the sidelines waiting for a better entry point to get back in.

It is critically important to consider the probabilities of success, through good and bad times. Often the worst days in the market are followed by the best days, without any obvious or knowable catalyst for the rebound. Sensible risk management allows you to be invested through both the good and the bad to reap the benefits of gaining long-term market returns, which translate into wealth creation over time.

2.Reconnect with what is truly important to you

The best financial advice is personalised and tailored with strategies to help you reach your goals. If you start feeling anxious about your finances or the state of markets, take a break from day-to-day market monitoring and check in on your financial goals. I’d love to be involved in this process. By reacquainting yourself with what’s important to you in life, and how to secure those things, we can adapt and improve – including why they are important to you, and how your current financial strategy can help you reach them. “Staying the course” is never easy amid volatility or market nerves, but goal setting can help slow down a racing mind, take a breath, and redefine what you really want in life.

3.Be your own devils advocate

If you’re starting to lean toward a change in your financial circumstances (for example, selling an underperforming investment or chasing the latest popular investment trend) ask yourself why someone else might buy or sell that same investment. Our minds have an easier time remembering and noticing facts and ideas that support our opinions, but forcing ourselves to take a different perspective before acting can reveal every angle of a decision. This technique can also help you when you’re sifting through information online. If you keep coming across evidence that supports your opinion, challenge yourself to find a site that convincingly shows the opposite. Or even better – come to me and we can explore it together.

4.Get to know your biases and turn down the noise

Reading or hearing about unexpected asset value changes can put any financially-minded person on edge. You’ve hired us to help manage this for you, so one useful tactic is to set a schedule for how often you check your portfolio to turn the volume down on that noise. The schedule should focus on the appropriateness of your investments in relation to your financial goals in life.

In relation to this, research shows that understanding our behavioural biases can help us spot them in our decisions. There is a saying that the best financial advisers are just as aware of psychology as they are financial analysis. Taking some time to read about the psychology behind our decisions and emotions is an advancement toward financial independence.

5.”The intelligent investor is a realist who sells to optimists and buys from pessimists”

This saying is an old favorite that comes from Benjamin Graham, one of the founding fathers of value investing. We’ve seen the full spectrum of fear and greed in the past year – but it pays to be a humble realist. Humans have overcome incredible challenges throughout the centuries, and we are on our way to overcoming the latest challenge. But don’t be fooled into thinking the recovery will be smooth or doomed. It will have speed bumps, with each change in sentiment creating potential opportunities for the intelligent investor.

We are well placed as your go to resource to help you thrive financially, acknowledging tomorrow’s challenges and working towards a shared goal of strong financial wellbeing.

6.Good financial advice takes a full spectrum approach

We understand the interaction of all the connected parts of your financial strategy needs and how a change in one area has a flow on effect in other areas. Our comprehensive and disciplined approach to the financial strategies that deliver valuable outcomes to your needs and what important to you in life, is what makes the most difference over the longer term.

Remember, things will always change in investment markets, government legislation and your personal circumstances. We are looking forward to conitinuing to work with you, maximising your financial outcomes no matter what the future throws at us. Our approach helps you make smarter financial decisions.

Happy Easter to all.

Please stay safe and well,

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