The Australian share market rebounded in April, with the All Ordinaries index closing the month up 3.8% at 5,168.6 points.
Global shares also finished April in positive territory with the Dow Jones Index gaining 1.8%, the FTSE gaining 0.3%, the Hang Seng gaining 2.0% and the Nikkei 225 gaining 11.8%.
The shift in market sentiment was sparked by positive earnings results in overseas equities, notwithstanding that key economies are still delivering mixed economic results.
In early April the Federal Government announced a series of proposed changes to super. Predominantly the proposed changes can be seen as positive.
The Government confirmed the tax-free status of super withdrawals in retirement, announced changes to make it fairer to deal with excess super contributions and announced a higher cap for concessional (or tax deductible) super contributions for those over 60 for the 2013/14 financial year.
The negatives from the changes are the proposal to tax income on pension accounts in excess of $100,000. Income below $100,000 will remain tax free for pension accounts. This relates to pension accounts only (i.e. retirement income streams) and does not apply to accumulation super accounts (which continue to be subject to 15% tax on all income).
Looking forward, the Federal Government will be releasing its Budget on the 14th of April. The Government has already acknowledged that its stated objective of returning the Budget to surplus in 2012/13 will not be achieved.
I noted 12-months ago that the revenue forecasts in the 2012/13 Budget were overly ambitious. Therefore, it is not a surprise (or concern) to see another year of budget deficit, and the Australian share market has already ‘priced-in’ a deficit. Although, with 2013 being an election year, it will be interesting to see what approach is adopted by Wayne Swan in the 2013/14 Budget in relation to spending and/or welfare cuts.
It is expected that the higher super contributions limit will be included in the 2013/14 Budget figures along with an increase in the Medicare Levy from 1.5% to 2.0% to fund the proposed National Disability Insurance Scheme.
The RBA board kept rates on hold in April at 3.00% per annum. The RBA board meet again next Tuesday, with again most economists expecting rates to remain on hold for the foreseeable future.
The Australian Dollar fell 1.5% in February and is currently buying US102.77 cents.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.