FSI endorsed, Mortgage rates rise, and the GFC rolls on... and on.
Although it can't be pinned onto the new government, the fact that nearly all the recommendations of David Murray's Financial System Inquiry were endorsed this week makes a welcome change from the treatment previous administrations gave to similar inquiries. Take for instance the Henry Tax Review which amazingly excluded the GST in the terms of reference in the first place (Rudd), and then cherry picked those they wanted, or the 2009 Johnston enquiry which, where accepted, took six years to implement.
What is encouraging is that although it will be some time for all the FSI's outcomes to come to pass beforebeing fully implemented, some decisions, such as the increase in bank capital, have flowed through already. Banks had been raising additional capital in anticipation (including as a result of the Basle lll requirements out of Europe) and may need to raise more again in the future, but the immediate effect was an increase in mortgage rates.
It could be argued that having been protected at no cost to themselves during the GFC by the government, the banks should be wearing the costs of increased capital themselves. Be that as it may, it is indicative that the after-shocks, or effects of the GFC continue, as shown by the increase in mortgage rates this week independently of the RBA, which in turn is now being tipped to lower official rates to compensate.
We are not suggesting for one moment that the requirement for the banks to hold more capital is a bad thing as it adds stability to the system in the event of future issues, including a potential down-turn in the property market which already seems to be rearing its head. On that note one of Murray's few recommendations not to be approved was a ban on borrowing by SMSF's for property, and one has to wonder why this is so.
So now we look forward to the outcome from the current thoughts on tax reviews which Malcolm Turnbull has sent back to the bureaucrats for a re-work. While it may take a while, one has to believe that there's a greater conviction for change from this PM and his ministers than we have seen for some considerable time.
And about time too!
Specific results received this week include the following PERFORMANCE UPDATES:
Pengana Absolute Return Asia Pacific Fund finished up 1.02% for the month, compared to the Asia Pacific market which fell -4.70% and HFR Event Driven Index which closed down -3.20%.
Laminar Credit Opportunities Fund rose 0.63% over the month of September and delivered 7.42% over the past 12 months.
FUND REVIEWS released this week:Aurora Foritude Absolute Return Fund; Totus Alpha Fund;Bennelong Long Short Equity Fund; QATO Capital Market Neutral Long/Short Fund
And on that note, enjoy the week-end.
Regards,
Chris
CEO, AUSTRALIAN FUND MONITORS
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