Markets
Local:
The ASX200 index fell -0.73% over August, keeping the index steady over the month.
Global:
The S&P 500 was down 1.77% in August, bringing its YTD return to 17.40%.
The Dow Jones Industrial Average decreased 2.36% for the month and was up 4.75% YTD.
The Stoxx Europe 600 Index declined -2.5% in August, down from previous record highs.
Gold:
The spot price for Gold fell slightly in August, finishing the month at US $1,939.
Iron Ore:
Iron Ore price increased by US $3 from its July figure to finish August at US $117.50/Mt.
Oil:
Brent Oil price continued its upward trend in August reaching US $86.86/bbl as US macroeconomic data continues to improve.
Property
Housing:
CoreLogic’s national Home Value Index (HVI) marked a sixth consecutive monthly rise, up 0.8% in August.
The monthly gain was a slight acceleration from the 0.7% increase in July, interrupting a two-month trend of slowing capital gains. Since bottoming out in February, the national HVI is up 4.9%, adding approximately $34,301 to the median dwelling value.
The recovery trend remains broad-based, with every capital city except Hobart (-0.1%) recording a rise in dwelling values over the month. Gains were led by a 1.5% increase across Brisbane, followed by Sydney and Adelaide where home values were up 1.1%.
Economy
Interest Rates:
The Reserve Bank has kept interest rates on hold at 4.1% for the third month straight but has flagged further increases may be needed to ensure inflation remains under control. It leaves the cash rate at its highest level since April 2012, and is the fourth time the RBA has paused its current rate-hiking cycle since it first began raising them in May 2022.
Retail Sales:
Retail sales in Australia increased by 0.5% MoM in July 2023, topping market estimates of 0.3% and reversing from a 0.8% fall in the previous month. Most non-food industries rose following larger falls in June. Department stores (3.6% vs -4.8% in June) recorded the largest rise, followed by clothing, footwear, and personal accessory retailing (2.0% vs -2.3%).
Bond Yields:
Australian government 10-year bond yields increased over August to finish the month at 4.13%, trading relatively unchanged as the RBA kept the cash rate at 4.1%.
The yield on the US 10-year government bond approached 4.3% in the first week of September as traders bet the Fed will keep interest rates high for a long period as the US economy continues to show signs of resilience.
Exchange Rate:
The Aussie dollar fell slightly over August finishing the month at $0.648 against the American dollar and at $0.594 against the Euro.
Inflation:
Australia: The monthly Consumer Price Index (CPI) indicator rose 4.9% in the 12 months to July 2023. The July annual increase of 4.9% is down from 5.4% in June. Annual price rises continue to ease from the peak of 8.4% in December 2022.
USA: Annual inflation rate in the US accelerated to 3.2% in July 2023 from 3% in June, but below forecasts of 3.3%. It marks a halt in the 12 consecutive months of declines, due to base effects. A year earlier, inflation had started to fall from its peak of 9.1%.
EU: Euro area annual inflation is expected to be 5.3% in August 2023, stable compared to July according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in August (9.8%, compared with 10.8% in July), followed by services (5.5%, compared with 5.6% in July), non-energy industrial goods (4.8%, compared with 5.0% in July) and energy (-3.3%, compared with -6.1% in July).
Consumer Confidence:
The Melbourne Institute of Consumer Sentiment index dipped 0.4% to 81 in August from 81.3 in July. Sentiment continues to show only a muted response to the RBA Board’s decision to leave the cash rate on hold in recent meetings. The Board opted to leave rates unchanged for a second month in a row at its August meeting, the first consecutive ‘on hold’ decisions since the tightening cycle began in May last year. Consumer sentiment has only lifted 2.3% in response, with continued pressures on family finances and concerns about the interest rate and economic outlook still weighing heavily on confidence.
Employment:
Australia: The unemployment rate increased by 0.2% to 3.7% in July (seasonally adjusted). Bjorn Jarvis, ABS head of labour statistics, said: “with employment dropping by around 15,000 people and the number of unemployed increasing by 36,000 people, the unemployment rate rose to 3.7%. “The fall in employment follows an average monthly increase of around 42,000 people during the first half of this year. Employment is still around 387,000 people higher than last July.
USA: Total nonfarm payroll employment increased by 187,000 in August, and the unemployment rate rose to 3.8%. Employment continued to trend up in health care, leisure and hospitality, social assistance, and construction. Employment in transportation and warehousing declined.
Purchasing Managers Index:
The Judo Bank Australia Manufacturing PMI remained unchanged at 49.6 in August 2023, final estimates showed. It pointed to the sixth month of contraction in the manufacturing sector but the strongest since February, indicating signs of recovery in recent month. (Readings below 50 points indicate contraction in activity, with lower results indicating a faster rate of contraction).
US Services PMI:
The S&P Global US Services PMI fell to 51 in August of 2023 from 52.3 in the previous month, missing market expectations of 52.2 to reflect the slowest expansion in the US services sector in six months. High interest rates and broad-based inflationary pressures weighed on consumer spending, driving service providers to report the fastest drop in new business since the start of the year.
US Global Manufacturing PMI:
The S&P Global US Manufacturing PMI was revised higher to 47.9 in August 2023 from a preliminary of 47 and compared to 49 in July. The manufacturing sector has contracted every month since November 2022 except for a brief stabilisation in April, and the latest PMI reading was in line with the average over this period.
Sources: ABS, AFR, AWE, BLS, CoreLogic, Macquarie MWM Research, RBA, TradingEconomics, UBS
Comments
Superannuation is Big Business:
AustralianSuper accused of trying to profit from grieving widows by taking up to eight months to pay out their entitlements
Australia’s largest superannuation company has apologised for the distress it caused two widows, and paid out their deceased husband’s entitlements in full, after it was accused of taking advantage of older women to drive company profits.
Eunice Brooke and Llynda Chapman’s husbands both passed away in late 2022, but the pair claim they spent months going round in circles as AustralianSuper delayed paying out their husband’s claims.
“It’s empty promises from the beginning to the end. There is always an excuse. There’s always a delay. There’s always some story of why they cannot do it,” Ms Brooke told Sky News Investigations Reporter Jonathan Lea.
Both widows described a wall that made it impossible to directly contact a claims member to check if uploaded documents had been received, checked and correctly acted upon. They say there was also no way to escalate their case to a senior manager.
“I honestly did not believe that I would ever get my money… but I thought I’m going to fight it no matter what,” said Ms Brooke, who discovered the company at one point had incorrectly listed a “totally different name” as her beneficiary.
For Llynda Chapman, AustralianSuper’s treatment stood in stark contrast to another superannuation company which paid out her husband’s funds swiftly.
“I always learned not to put all our eggs in one basket. We did have another super fund and that paid out within two weeks. I put the application in and two weeks later I had it,” she said.
AustralianSuper refused multiple requests for an interview, saying instead by statement that it “would like to apologise for delays that occurred in the processing of the death claims of the two members. Both cases have now been resolved…”
“… AustralianSuper is deeply sorry for the added distress caused by the delays in processing and paying out these claims.”
Federal Minister for Financial Services Stephen Jones told Sky News Australia he was deeply concerned, warning if service standards didn’t lift, the government would look to toughen regulations.
“The industry is on notice. They’ve got to lift their standards. If they are not able to do that voluntarily, then the government will look to put in place service standards which are in line with community expectations,” he said.
“The truth is superannuation funds make money by having more money, and if they are paying money out, then they are not getting fees on that so there is a financial incentive to keep as much money as they can in their funds, however, their first and most important obligation is to the investors.”
Death Benefit Nominations
In the last financial year, the Australian Financial Complaints Authority (AFCA) received 366 formal complaints about death benefit nominations in super. It’s the third-most complained about area in super, behind account administration and insurance.
And behind each complaint there is stress for those involved, such as pressure on relationships or tension between family members.
Disputes can also leave those who might be relying on the money out of pocket while they wait for the process to be completed.
Making a death benefit nomination
A death benefit nomination directs where any leftover super goes when you die. Nominations can be binding or non-binding.
- In a binding nomination, the super fund has to follow your wishes.
- In a non-binding nomination, the super fund has discretion over where to distribute the money.
Nominations can also be lapsing or non-lapsing.
- Lapsing nominations expire after three years and the member has to renew them for them to remain valid and binding.
- Non-lapsing nominations don’t expire.
When a nomination isn’t binding, has lapsed, or isn’t valid for any reason, the fund has some discretion over who gets the money.
It is possible to join a super fund without ever completing a nomination form, or a super fund may not check that a nomination is valid. In both cases where there is no valid nomination the fund would be responsible for distributing the funds as they see fit.
“I think it would be good to check for validity at the time the members created the nomination,”
Super Consumers Australia policy manager Franco Morelli agrees with the experts that there’s value in an independent audit of the nomination system.
“The nomination process is currently extremely complex and puts a lot of onus on members to get it right. A review could determine how we can simplify and improve the process to give Australians peace of mind about what happens to any super they have left over.”