June Quarter Review

The June quarter maintained the strong ASX200 rally recording a new all-time high before easing to close at 7,313, up 7.7% for the period. The continuing themes of low interest rates and Government stimulus fuelling the momentum in prices.

State of Australia

The Australian economy remains resilient with the Australian Treasurer Josh Frydenberg stating, “There are more people in work today than before the pandemic began, and our economy is bigger today than before the pandemic began”. The unemployment rate has improved significantly falling to 4.9% its lowest point in 10 years. The Government continues to encourage lower unemployment with a view to stimulate wage growth though competition for employees. However, under employment, that is those who would like to work more hours, remains elevated.

The Reserve Bank of Australia is maintaining focus on its key indicators of:

• Near 4% unemployment believing this is likely to simulate wage growth around 3% pa
• Inflation sustainably between 2-3% pa
• 2024 to be the earliest these conditions will be met

However, economists are more optimistic believing these conditions could be satisfied as early as late 2022 and are predicting a rate hike for November 2022.

House price growth is touted to slow from high levels on the back of closed international borders and a record number of homes built in 2021.

Australian authorities are fighting to control various Covid-19 Delta strain outbreaks with both Sydney and Melbourne back in lock down. The early stages of the outbreaks are showing promise, but the situation remains tense.

Portfolio Positioning

The effects of lower interest rates are noticeably flowing though markets. Asset prices remain high. Quality assets perceived as undervalued in the current environment are receiving bids from private equity evident though recent bids for:

• Australian Unity Healthcare Property Trust
• Spark Infrastructure (SKI)
• Sydney Airports (SYD)

As more investors search for income returns, the expectation is for asset prices raise causing a fall in income payments. We believe this process will continue to support elevated asset prices.

Important Changes to Superannuation for Financial Year 2021-22

The New Financial Year brings a few important changes to the superannuation rules. With the following key changes among others:

• An increase from $25,000 to $27,500 for concessional contributions
• An increase from $100,000 to $110,000 for non-concessional contributions
• An increase in the superannuation guarantee percentage to 10%
  • The superannuation guarantee percentage is scheduled to increase 0.5% for the next 4 years to 12%
• Minimum Pension payment remains 50% discounted

Covid-19

We at Limberg Asset Management trust you and your families are all safe and healthy. At this stage we remain open and operating from our North Ryde office. We are cognisant that lockdown provides a unique set of challenges and would encourage you to take time to look after your own mental health and stay active. It has been said that all human history is a consequence humanities inability to sit still in a room so it will be interesting to see what becomes of our current predicament.

Should you wish to have a conversation please do not hesitate to contact with either Terry, Chris or Kieran.

We are pleased with the continuing strong performance of portfolios and are working hard to perpetuate good returns into the future. In these challenging times we are happy to apply our unique skills to improve financial outcomes for all our clients and those who could use some help or direction.