Just a few days ago the US Federal Reserve, the equivalent of our Reserve Bank, announced an increase in US interest rates. It’s a sign the American economy is strengthening, and higher rates in the US should help the Aussie dollar stay low. That’s good news for local exporters and our tourism industry.
Residential property, especially in Sydney and Melbourne, stole much of the limelight this year as prices skyrocketed. Initiatives introduced by banking watchdog APRA have put the brakes on investment lending, and this is taking some of the heat out of the market. It’s not a bad thing as it should support more moderate, and sustainable, property price growth over the next few years.
Australian shares have had a lacklustre year, with the ASX 200 index falling about 1.0% over the past 12 months. Market dips in early December have seen share values soften creating buying opportunities. So, I plan to add to my share portfolio in 2016 – not just for the potential long term capital gains but also to enjoy tax-friendly dividends.
On the interest rate front, many economists are tipping rates will stay low for an extended period. Savings accounts are currently paying an average return of just 2.7%, so it can pay to look at other ways of making your money work harder.
That doesn’t mean turning to high risk speculative investments. Paying down personal debt can be a smart strategy in a low rate environment.Or use spare cash to grow your super. Figures from SuperRatings show balanced super funds are on track to deliver a return of around 5.2% for 2015. It’s not quite up there with the gains of 8.1% and 16.3% achieved in 2014 and 2013 respectively, but it’s close to the 5.9% average annual return notched up since 2000.
The key thing is to take an active interest in your finances in 2016. I expect next year will fly past just as quickly as 2015, and it would be great to have your finances in better shape this time next year.
Have a wonderful and safe festive season, and I’ll be back with more suggestions on making money in 2016.
Paul Clitheroe is a founding director of financial planning firm ipac, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.