Will house prices rise or fall? Will the government implement changes to the super system? And will customers be able to wear online banking technology?
RateCity caught up with the experts and asked them these burning questions and more to get their predictions for the year ahead.
The bottom line: it’s all possible in the year 2016.
Saul Eslake, Economist
Dollar to hit the mid 60’s
The Australian economy in 2015 was a bit like the curate’s egg in what became a famous cartoon published in the British satirical magazine Punch 120 years ago – it was good, in parts. Although overall growth remained ‘below trend’ for the third year in a row, job creation surprised on the upside and the unemployment rate appears to have peaked at a lower rate than anticipated at the beginning of the year. Although the Australian dollar was once again showing surprising resilience in the face of the ongoing decline in commodity prices, there are increasing signs that the earlier decline in the currency is providing a boost to tourism, education, agriculture and even some parts of the otherwise beleaguered manufacturing sector.
Against this background, the Reserve Bank is unlikely to perceive any need for further reductions in Australian interest rates. With commodity prices yet to find a floor, and the US Federal Reserve set to raise interest rates another three or four times in the coming year, the Australian dollar will likely fall to somewhere around the mid-60’s against the US dollar, which will probably bring ‘underlying’ inflation back up to the mid-point of the RBA’s 2-3 per cent target range
Ian Muir, Head of Customer Experience for Digital, Westpac
The future of internet banking is going to be a very interesting one because the resources that used to be scarce, like bandwidth and storage, are no longer constraining us or limiting our possibilities. Essentially, where scarcity disappears, the unimaginable rapidly becomes reality allowing us to deliver benefits to customers in new and exciting ways.
I think there’s definitely something in wearable devices and the way we think, act and interact with technology. Also I think the intelligence layer around the ability to create instantaneous insights in the moment on customers is an emerging trend and the sort of thing that will shape the future of internet banking.
Nicole Pederson-McKinnon, Commentator, Educator and Founder of themoneymentorway.com
Beware of your credit card
It was widely missed but the Senate gave the banks a total bollicking at the end of 2015.
An extensive inquiry by the economics committee into credit card fees and interest rates – which are stupid-high compared to the record-low cash rate – found issuers were “taking advantage” of consumers and earning “significant profit.” It didn’t take actual action on rates though, as you might suspect from a ‘free market’ style of government. But it did recommend new laws to force card providers to make interest rates ‘in your face’ on all marketing, advertising and also monthly statements.
This is great news for consumers as they actively hide them at the moment. And they never tell us when they hike (they’re required to ‘fess up when they hike mortgages).
Look out for a coming crackdown on ‘honeymoon’- style offers too. When the low or no-interest period is up, they might soon be forced to alert us. The government is also looking to set minimum repayments – at the moment banks can. This means they’ll go up – cheaper for customers in long term but, of course, more costly each month. And the Senate’s called for another report into fees and surcharges.
In any case, the banks have seen this crackdown coming a mile away and cynically taken steps to circumvent the slap. A raft of new tricks and traps are designed to protect their $7bn in interest and fee revenue, including extending massive credit limits, offering unsolicited cash advances and hiking ‘revert’ rates on interest-free purchase deals and balance transfers. And those balance transfers now often come with a savings-cancelling so-called balance transfer fee.
As card companies get more desperate, be on guard in 2016!
Michael Yardney, Property Investment Expert
Sydney and Melbourne property prices to slow in 2016
Melbourne and Sydney are going to slow down and Perth and Darwin will probably still have a little bit more in the way of falls over the next 6-12 months as they’re still unravelling the mining boom. The other capitals will probably do much the same as they did this year with between 3-5% capital growth. I see Melbourne and Sydney still doing probably 5-6 per cent capital growth over the year and Brisbane much the same which is basically what it did over the last 12 months.
I see minimal growth drivers in regional areas and no growth drivers in mining areas. I think again the capital cities will be where the job growth, wages growth and economic growth will be and that’s going to lead then to people being comfortable buying properties in capitals.
Vaughn Richtor, CEO, ING DIRECT
Customers will take greater control of their finances
In recent years customers have demonstrated an appetite for taking greater control of their finances and this is set to continue in 2016.
The availability of digital technology has made it easier for customers to access personal finance information, build their knowledge and plan for the future using online tools and calculators– independently of their banks’ input.
People are relying more on the personal opinions and experiences of friends, peers and the online community and weighing up information from a variety of sources prior to making decisions.
As Australians become more informed, we’re also seeing them becoming more open to switching providers to get greater value for money – particularly in terms of minimising fees. Research by RFi has shown that 12 per cent of Australians say they are highly likely to switch banks in the next 12 months.
However, they are also increasingly likely to consider multiple providers rather than have a relationship with just one financial services provider.
Norman Morris, Industry Communications Director, Roy Morgan
Big changes for super
In 2016 we are likely to see considerable changes relating to superannuation. The pressure for change is coming from the deteriorating budgetary position and the increasing cost of the social welfare bill. The New Year will probably see the introduction of limits on the amount that can be held in superannuation that is not subject to tax in the retirement phase, tax to be paid on withdrawals over a certain amount and the introduction of the concept of maximum lifetime contributions outside of the compulsory levy. Lump sum withdrawals on retirement are also likely to come under review and replaced by regular income products such as annuities.
The government has been giving clues that they also have in mind other means of making up for the fact that many people have inadequate superannuation to fund their retirement. These include encouraging older people to realise some of the equity in their house by either downsizing or taking out reverse mortgages.
There is also likely to be a continued focus on making up for the gender imbalance in superannuation, where women on average have only two thirds of the male balance.
The challenge for the government in 2016 will be how to introduce significant changes without undermining confidence in the system which is designed for the very long term and as such should not be subject to frequent rule changes.
Dr Andrew Wilson, Senior Economist, Domain.com.au
Investor activity to remain robust in 2016
While the housing market is likely to be relatively subdued comparatively, it is likely that activity from some buyer types – particularly investors – will remain robust and increase. Despite higher interest rates, investors will be drawn to the relatively high yields available and continued taxation advantages – particularly for small-scale investors.
Australia’s capital city property markets will remain key targets for foreign investors in 2016, particularly from China. The demand from foreign investors reflects the country’s strong cultural and economic connections and is indicative of the security of local residential property. Buyers from China will continue to target CBD and inner-suburban apartment markets in Sydney and particular Melbourne and will remain a significant source of demand and supply in these burgeoning sub-markets.