💸 Everything You Need To Know About The Big Financial Changes That Have Started!

Dr. Christian Baylis is the Founder and CIO at Fortlake Asset Management.

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Episode Transcript

Speaker 1 (00:00):
J J and Amanda gem Nation some big changes on
the financial front and increase in minimum wage for some
and a change in superannuation for others.

Speaker 2 (00:10):
What does it mean and who's impacted? For more. We're
joined by founder and CEO of fort Lake Asset.

Speaker 1 (00:15):
Management, one of austraight is leading economists to Christian Balist
Christian high.

Speaker 3 (00:21):
Hey jamesy, Hey Amanda, how you are.

Speaker 4 (00:22):
In Christian So who's paying for this extra two percent?

Speaker 2 (00:27):
Are we paying for that superannuation?

Speaker 4 (00:29):
Yeah?

Speaker 2 (00:29):
The superannuation?

Speaker 4 (00:30):
Or does your boss.

Speaker 3 (00:30):
Pay for it? Well, I guess it ultimately depends who
you work for. Obviously, through in the private sector, your
boss is paying for it, and assuming that they're not
part of the government, that obviously means that there'll be
probably a few unhappy bosses out there. And then obviously
the government will also if you're in a government employee,
I should say, they'll obviously be paying in higher amounts

(00:53):
on super as well. So basically it goes all the
way across the economy, and obviously it's a good thing
for for working families and working people, but ultimately it's
also a good thing for the surety of the financial
system because I think when we talk about these increases,
people often forget that one of the big silver linings
was when we went through the financial crisis in two

(01:15):
thousand and eight, one of the things that saved us
was our superannuation system. It was the gold standard and
everyone looked to Australia and said, wouldn't have it been
fantastic if if we had something like that. So there's
a lot of positives about the superannuation system and now
we're sort of obviously pushed it all the way up
to twelve percent, which is obviously getting a lot higher
than what it was back I think it was around
about nine and a half back then in two thousand

(01:37):
and eight. So it's come a long way and we're
in good shape.

Speaker 1 (01:40):
Can you explain to me how it saved us during
the financial crisis, meaning that people could rely could draw
down on this super What do you mean by that?

Speaker 3 (01:48):
Well, what it meant was when the banks got into
trouble and there wasn't a lot of funding around, we
had this big pool of money sitting there in our
superannuation system and basically the banks could go to the
superannuation funds and say, hey, we need a little bit
of help. We need funding, and we did. We had
all that money sitting there. It was easily accessible. At

(02:12):
that point in time, our superif our superannuation funds weren't
so heavily invested offshore. They tended to be a bit
more domestically focused, and we did. We really draw upon
that money and it became, I guess, a thing that
really helped the domestic banks and helped a lot of
financial institutions here domestically to help get them through a
rainy day.

Speaker 2 (02:31):
But as you say, it is reliant on investment, so
you just hope the investments are good.

Speaker 1 (02:35):
It is.

Speaker 2 (02:36):
It is a whim, isn't it for investors?

Speaker 3 (02:40):
That's right, it's a it's a double edged sword. But thankfully,
I think you know, as you know, as as we've
heard and as we've seen, you know, during the financial crisis,
what might have seen like a risky investment for the
superannuation funds to give the banks that money during that
risky period, they were obviously very or compensated. And even

(03:02):
the banks that brought shares, sorry the superannuation funds that
brought shares and did those sorts of things during that
period obviously did very well. So you know, everyone came
out pretty well off the back of that. But it
just goes to show if you've got the system there
and you've got it in place, if we do fall
upon hard times, we can to some extent rely on

(03:24):
you know, our big superannuation balances and those sorts of
things to you know, as a place for that funding.
We don't have to always look offshore or look somewhere else,
look to the government. We can always sort of look
to this, to this superannuation nestick to help us.

Speaker 4 (03:39):
And what about people that say we should get rid
of superannuation it seems a little bit crazy.

Speaker 3 (03:44):
Well yeah, yeah, Look, I mean I think the evidence
is pretty clear that it's been a great thing for
the nation. The people that have been invested or had
superannuation balances now since since it was conceived, you know,
they've done very well. Equity markets and share markets have
gone up a long way. And probably the biggest criticism

(04:05):
is we should have got to the twelve percent earlier,
because you know, we've foregone some of those great earnings
by not bumping it up quick enough. So look that
undoubtedly the compounding benefits, meaning you know, the month on month,
year on year growth of these superannuation balances that people
have had or have been forced to have. You know,

(04:25):
it's been a great thing for the nation, a great
thing for individuals and a lot of people, you know,
can thank government policy ultimately for being able to retire
with a pretty healthy nestic But also.

Speaker 4 (04:35):
That tax that they talk about. They talk about three
million dollars at the moment, and there's two percent of
the country that has that. But down the track, Yeah,
governments aren't likely to take back tax, are they, So
this could be a bad thing for the future.

Speaker 3 (04:49):
Yeah, Look, it's one of those things. Look at it
has been definitely a victim of constant tampering because it
has been so successful. It's almost been a victim of
its own success. That probably the first place that politicians
look to to raise money whenever their budgets, you know,
aren't in line or we need help to balance the books. So,

(05:11):
you know, you do run the risk that superannuation doesn't
become this place that people want to. I guess ad
additional money too, because it's always getting tampered with. And
obviously we've got the three million dollar threshold that's there,
You've got the increase in taxation some You know, some
people pay thirty percent on their on their earnings in

(05:34):
SUPER and if you're locked up for what feels like
a lifetime for those people on the higher income tax threshold,
So if you're on forty eight percent, that people might say, well,
you know what, I'd prefer not to have SUPER. I
prefer not to put my money in SUPER because there's
only a marginal benefit from a taxation perspective. But I'm
also locking up my money for quite a long period

(05:55):
of time. So a lot of people would argue that
SUPER is not the best thing for them because they
would like to have their money here and now. A
good example of that is people would like to go
and buy houses with their with their SUPER instead of
having it locked up. So, you know, there's there's pros
and cons to it, but I think, you know, we've
got to look at it, look at it on the
whole and on the whole, for the for the nation.
It's been a great thing.

Speaker 2 (06:15):
Well good on you, Christian, thank you for joining us.

Speaker 3 (06:19):
No thanks, guys, thanks having failure.

Speaker 1 (06:21):
Actually it was the Superannuation Guarantee Act came into force
thirty three years ago yesterday.

Speaker 4 (06:27):
I was one of the first people that got a
part of it about it, Yeah, your own super My
dad said, get your own super because you can't rely
on the government. So I got that, and then they
did the compulsory working super work.

Speaker 2 (06:41):
This is why you're not the economy. We true about
these things.