This article, by Justin Baiocchi, was originally published in The Northern Daily Leader on 14 January 2017.
The start of a new year is always an exciting time; an opportunity to look ahead with hope and anticipation. To push the reset button and forget about the year gone past. And what a year that was! 2016 was not the worst year we’ve ever seen – no major wars, crises or market collapses, but it still seemed to be a dramatic one. The UK decided it didn’t want to play in the European sandpit anymore; Malcolm Turnbull snuck back in the Lodge by a wafer thin margin and in the US, well, let’s just say that everything is apparently going to be great again! The truth is, every year has its ups and its downs. Humankind has an amazing ability to create new and novel ways to do both good and bad. From an investment perspective, the key to surviving any year is to make sure you have a plan. The old saying, failing to plan is planning to fail, really is true. Sure the odd major event might throw a spanner in the works (such as another global financial crisis), but having a financial plan helps to keep you pointed in the right direction, regardless of the odd bump encountered on the way.
A good financial plan is one which can adapt to the world around it. Just as circumstances change, so should your planning. Unfortunately, governments have a tendency to make unanticipated decisions which can have a major financial impact. While it’s not necessarily a requirement to predict those adverse decisions in advance, it is advantageous if you are able to adapt your finances to the new regime. The issue of superannuation is a perfect example of the ability of regulatory change to cause chaos. While you would assume the government is happy for more and more of us to be financially self-reliant during retirement, that is not necessarily the case. For every dollar that we squirrel away in superannuation, the government loses a few cents in additional tax revenue. It’s a case of long term gain (fewer retirees on the Age Pension) versus short term pain (less tax revenue now). Unfortunately, few politicians have a timeframe which extends past the next election. From their perspective, a few extra cents in tax now, is better than saving a few dollars in pension payments in twenty or thirty years’ time. That will be someone else’s problem, while the current crop of pollies will be retired on their generous government pensions by then. Here’s a new year’s resolution for our political leaders – stop squabbling amongst yourselves and let’s make government great again! It can’t be that hard, can it?