Green Shoots

The Federal Election has come and gone, leaving the result most business owners and investors were expecting but will the confidence instilled by a more stable Government bring the green shoots Australia needs?

In the week leading up to the election when our Nation’s fate looked sealed firmly in blue tape, the consumer confidence number started to climb, rising by 4.7% in September from August and sitting at 110.6, above the 100 level where optimists outnumber pessimists.

The business confidence numbers also strengthened significantly in this period, with the index rising in August to its highest point since May 2011.  The consecutive cuts in the cash rate may have helped, but seemingly more important were the anticipated political changes.

Nationally, housing is also providing a badly needed sign of life in our economy, with six consecutive weeks of 80%+ auction clearances in Sydney at the time of writing, and Melbourne achieving their highest rate since 2010, at 76% .

Equities, which were struggling under the weight of the Syrian crisis and the end to quantitative easing in the US in August, seem to have lifted their tone with the news that Russia and America plan to do everything they can to avoid full blown conflict.

Could these be the green shoots of Spring in our economy that so many are looking for to invest?

Over the coming three months we are looking for three shifts in the market:

We expect the USA will continue down the forewarned path of reducing its quantitative easing, bringing to fruition something the market already expects.  This could cause some market instability around announcements.

We see the continued weakness in commodity prices and Asian markets driving a gradual and painful weakness across the mining economy in Australia and a continued flow through to other sectors.

And the handbrake coming off Australian business confidence, as the Liberal Government starts to make their policy changes.

One big hope we all have is that the recent reduction in the $A dollar will act as a natural stimulus improving investment and export growth that stimulates our business economy.

Significant investment in Australia – a growing Asian trend

At Prosperity, through our extensive global alliances with LEA and IAPA, we are noting that foreign investment into Australia continues despite the softening economy.

Barely a week goes by without an enquiry from our USA, UK or Asian colleagues seeking advice on Australian investment and regulatory issues. More recently we are fielding enquiries from those seeking to migrate using a Significant Investment Visa.

In fact, in the coming financial year, immigration lawyers, BasisPoint predict there are more than 1000-1500 significant investment visa applications expected for investors and their families. An annual quota of approximately 7400 visas has been allocated as investors and their family members elect to move here under the Business Innovation and Investment Visa program.  With an average of 3.5 people per family unit the upper limit would sit at 2114 as a real ceiling to the quota.

The Significant Investor Visa program for Australia was only launched in November 2012, and this year is expected to yield $6b in annual inflows to Australian funds and businesses from ultra high net worth investors, predominantly from Asia.

Foreign investment in Australia isn’t a new thing, but investment coupled to migration is certainly on the rise with dramatic increases in interest from China and other Asian nations.  China was ranked as Australia’s third largest foreign investor ($16.2b) in the 2011/12 financial year, behind the US ($36.6b) and the UK ($20.3b), but Chinese foreign investment arrived in much smaller parcels.  The average deal size done by Chinese investors was $3.4m which contrasts with the average US sourced deal size of $136.6m.

The most common deals done by investors were in the resources and real estate sectors, accounting for 32% of all foreign investment over the year.

What this says to us is that the Chinese investor is out there looking for investment opportunities that are smaller in size and more accessible. Asian clients we have represented are taking a drip feed approach with bite sized investments initially as they seek to understand our domestic markets and regulatory regimes.

But what are they buying? There were 11,142 Foreign Investment Review Board (FIRB) approvals last year from over 40 countries and 9768 of them were for residential real estate.

Those moving here on Significant Investor Visas are mostly first generation wealth and often have a wider range of risk appetite and investment outlook than those who are carrying second or third generation wealth.

For more information into the Significant Investment Visa please contact Luke Malone, Director of Prosperity’s Asian Business Desk.

Health and medical alliance increases depth of expertise

For many years, Prosperity has been building our Health team, specialising in providing medical and allied health professionals with a deliberate, proactive accounting, advisory and financial planning service.  There has been a lot of demand for these services, and with the growth anticipated in the health sector over coming years, we have moved to further strengthen our expertise in this important client segment of our firm.

So I am pleased to announce our alliance with McMasters, a Melbourne based practice with over 20 years of experience in advising the medical industry.  Our alliance arrangements commenced in March and I am pleased to say that our medical and allied health clients are benefiting from this new arrangement that significantly deepens our expertise.

Our Prosperity Health team with the support of McMasters will continue to provide comprehensive support through all the career stages of medical and allied health professionals. Our recent seminar series on minimising tax, growing your practice and planning for succession was enthusiastically received by over 200 participants.

Sydney – investing for the future

Prosperity Advisers is planning for substantial growth in 2014 despite the tight economic conditions. The expected increase in operations has prompted a move recently to larger custom designed premises in Elizabeth Street.

Sydney Office Principal, Stephen Guthrie said “the move allows ample space for growth, provides our people more modern and effective work spaces and importantly for our clients and visitors it provides additional briefing rooms and convenient transport links.”

The firm has over 100 staff across its Sydney, Newcastle and Brisbane offices. CEO, Allan McKeown says “Prosperity has invested in building our capability in a number of areas.

“The development of personal global connections through our international alliances has resulted in much activity as Sydney benefits from direct Asian investment and international interest in Australia as a safe harbour entry point. Our well resourced Asian desk with multi-lingual capability has been particularly well received.

“Our ability to meet the sophisticated needs of ultra high net wealth individuals through a comprehensive seamless service offering and the expansion of our medical and allied health speciality through our acquisition of the East Coast clients of a speciality firm, will also fuel our growth this year.”