Jacqueline Barton

Managing your credit responsibility is vital for financial health. Whether you are applying for a credit card, a loan, or a mortgage, it is essential to maintain a good credit history to secure the best terms and interest rates. However, it is easy to fall into common credit traps that stop financial goals being achieved due to a low credit score. Here you can find the top credit mistakes to avoid and how to prevent them.

1. Neglecting to Check your Credit Report

Staying on top and monitoring your credit is the best way to not only track your progress, but to ensure no errors or fraudulent activity. By neglecting your credit report, you risk impacting your ability to secure credit because of issues left unnoticed. Fortunately, many major credit bureaus offer free credit reports annually, making it easy to stay informed. Regularly reviewing your credit report is crucial to spot potential problems and addressing them before your credit score and financial goals are negatively impacted.

2. Missing Payments

The most influential factor of your credit score is your payment history, and a single late payment can stay on your credit report for seven years. Ensuring you pay bills on time not only boosts your credit score but also helps you in avoiding penalties. The best way in avoiding missed payments is to request payment reminders from your lenders, or better yet, setting up automatic bank transfers. This will ensure you never miss a bill, and your credit growth will stay on track.

3. Only Making Minimum Payments

Although it might seem like your debt is more affordable when only paying minimum payments on your credit card, this can cause long-term financial problems for your future. While it does mean your account is kept from falling into arrears, paying only the minimum means you are not making much progress on reducing your balance. In turn, this can result in high-interest charges and a prolonged debt, damaging your credit score. To avoid this, strive to pay more than minimum where possible in an aid to reduce your debt efficiently and keep a healthy credit score.

4. Applying for Too Much Credit

Having multiple credit applications in a short period can damage your credit score as too many inquiries in a short time frame can signal to lenders that you are taking on more debt than you can handle. This will lower your credit score and reduce your chances of getting approved for credit and loans such a mortgage in the future as you appear financially risky to lenders. If having multiple credits is something you seem necessary, it is important to space out these applications at least 6 months apart to protect your credit score.

By avoiding mistakes such as neglecting your credit report, missing payments, making only minimum payments and applying for too much credit, you’ll be in a better position to maintain a health credit score. Staying discipline is key to achieving a strong credit rating and set yourself up for long-term financial success.

In this month’s update, we provide a snapshot of economic occurrences both nationally and from around the globe.

Key points:

• President Trump policy initiatives drive increased volatility in markets and geopolitics
• Despite some economic softening corporate earnings continue to hold up
• Without the NDIS impact our labour market is not as robust

We hope you find this month’s Economic Update as informative as always. If you have any feedback or would like to discuss any aspect of this report, please contact your Financial Adviser

The Big Picture

At last, the Reserve Bank of Australia (RBA) has started its interest rate cutting cycle by reducing its overnight cash rate (OCR) by 0.25% (or 25 bps) to 4.1%. The last hike (+25 bps to 4.35%) was made in November 2023 and the first hike in that cycle was in May 2022 after more than a year at the ‘emergency setting’ of 0.1% to help withstand the impact of the pandemic. While we believe the rate cut was needed last year, getting it now is a better outcome than continuing to wait.

The RBA is charged with a dual mandate of maintaining: (1) price stability and (2) full employment. The problem is, inflation and unemployment data have been confounded in the last few years by the interest rate rises and the growth in the NDIS scheme.

At the end of February, the Federal Treasurer, Jim Chalmers, argued that landlords should bring rents down in line with the first interest rate cut and those that might follow. We agree with this causal relationship but it makes no sense unless Chalmers also admits that the interest rate rises in the overnight cash rate, from 0.1% to 4.35%, flowed through to a rapid rise in mortgage payments and, hence, to rents. Part of the rate increases caused higher inflation – working against RBA reasoning.

Rents are a significant component in the Consumer Price Index (CPI) basket of goods and services and the current rate of rent inflation is 5.8%, which is down from 7.8% in August 2023. Because of the length of leases, rent inflation tends to react to changes more slowly than many other items in the CPI basket.

The RBA argument that inflation was sticky and that delayed making interest rate cuts is fallacious. Cutting rates sooner would have taken pressure off mortgage rates and rents.

Recent reports highlighted that the National Disability Insurance Scheme (NDIS) has expanded rapidly in the past two years. Many of the people now employed through the scheme were previously doing similar work but without being paid and, hence, classified as being unemployed.

While the principle of the scheme is laudable, the newly classified ‘carers’ and others as among the official employment data has led to a misunderstanding of how to interpret employment growth and levels of the unemployment rate.

It has been reported that the majority of jobs created in 2024 were due to the NDIS expansion. Since the jobs are funded from taxpayer revenue, they do not reflect how ‘hot’ the labour market is from market forces.

It is true that the same could be said about other government employees – such as teachers, nurses and police – but we are not saying that this source of employment and funding is inappropriate. We are saying that the rapid change in the NDIS means that a 4.1% unemployment rate today is not comparable with 4.1% two or three years ago. Our ‘back of the envelope’ estimate of what the unemployment rate would be without the NDIS is in the range

of 5% to 6%. If the Australian Bureau of Statistics (ABS) had published unemployment rates in that range, the RBA would have been slashing its cash interest rate much earlier in this cycle.

When the growth in the NDIS slows as the programme reaches maturity, it will not make the unemployment rate rise but employment growth should fall. This situation will become the ‘new normal’; the ‘old normal’ is not entirely relevant now.

It has also been reported that the NDIS sector has lower productivity than the traditional sectors – and NDIS pay is lower. Therefore, we expect aggregate wage growth and productivity to continue to be lower going forward.

February began with US President Trump signing executive orders to impose 25% tariffs on Canada (but 10% on energy) and Mexico – and an additional 10% tariff on China.

The Mexico and Canada tariffs were pushed back from an immediate start to the beginning of March. The delay was due to Mexico and Canada each agreeing to put 10,000 more troops on their respective borders with the US to combat illegal immigration and the importation of fentanyl (an addictive pain relief medicine).

At the end of February, Trump announced in a speech that he was also going to impose a 25% tariff on the European Union (EU). On the last day of February, Mexico announce it was sending a number of ‘drug cartel lords’ to the US to face charges. That maybe enough to keep Trump pushing back the deadline for the new tariffs.

It is important to appreciate that Trump has a very different way of communicating from most other leaders. He blusters and barks to appeal to his supporters. He has stated that tariffs and other measures are designed, in part, as a negotiating tool to get other ‘deals done’. For this reason, it is extremely difficult to interpret what Trump will do as opposed to what is said in the threats. Markets move on these Trump diatribes and so cause market volatility as the normal market approach is to sell first and ask questions later.

We regularly analyse the LSEG (Refinitiv) survey data on forecasts of individual company earnings and dividends collected from prominent brokers. The data so far are holding up well so the medium-term market trend might be reasonable but short-term volatility might make for a bumpy ride.

Recent market volatility was exacerbated by the launch of DeepSeek by ‘high-flier’ a hedge fund based in China. This software uses a different technology to ChatGPT and other US generative AI applications. China claims it was very much cheaper to develop and has big efficiency gains in terms of the need for advanced chips (such as those designed and sold by Nvidia) and power consumption.

Since there appears to be no independent corroboration of the China claims, we do not know to what extent DeepSeek will be adopted in the West.

Nvidia, the once biggest stock in the US by market capitalisation, took a sharp price hit on the news but Nvidia’s CEO, Jensen Huang, seems confident about the future of its business. He predicts the next generation of AI will require ‘100x more’ computing power.

Five of the seven ‘mag 7’ stocks (7 largest technology companies listed in the US) just reported earnings above consensus broker expectations and similarly six of them on revenues as well. All the hyperscalers (large, powerful and heavy users of data) reporting their earnings after the DeepSeek launch. All predicted strong growth in capex (capital expenditure) going forward.

For security reasons, DeepSeek has been banned from use in various government and military departments in the US, Australia and elsewhere.

As far as the Artificial Intelligence (AI) boom is going, it is important to appreciate that companies like Nvidia provide infrastructure – advanced chips that are used in mammoth computing systems.

Some fund managers in the tech space are predicting that the next wave in AI will be in software. Currently, many of these companies are small but will grow rapidly over time. We think the AI boom will last many years, if not decades but, as always, we don’t expect markets to move in straight lines!

Around the world many central banks are scampering to cut their interest rates. New Zealand just made its fourth successive cut – the latest being 50 bps – to 3.75%. The ECB has cut interest rates four times since June and is expected to cut again in March. The German economy is struggling with -0.2% growth in the December quarter of 2024 after 0.0% in the September quarter. Canada made its sixth rate cut at the end of January.

In essence, there are long and variable lags between interest rate changes and the reaction in the real economy – these are typically of the order of 12 to 18 months. As we wrote last year, being ‘data dependent’ was destined to fail because waiting for weakness to appear before starting to reduce interest rates means at least another 12 – 18 months of economic weakness after rates are returned to neutral levels.

Australia’s situation has been masked by immigration flows and the growth in the NDIS. There have already been seven successive quarters of negative per capita growth. The RBA might not cut rates at its next meeting (April 1st) because of the proximity of that board meeting to the impending Federal election. The latest Sydney Morning Herald (SMH) poll has the Liberal National Party (LNP) ahead of Labor by 55:45 in a two-party preferred vote.

The US was thought to have dodged a bullet and engineered a soft landing – but some economic data softened at the end of February. GDP was revised downwards slightly to 2.3% for December quarter 2024 (from 3.1% in September) but per capita personal disposable income was revised downwards in December 2024 from 2.1% to 1.9%.

More telling is the latest US consumer confidence index published by The Conference Board. It fell from 112.8 last November to 98.3 in February coinciding with the increased chatter over Trump 2.0! And inflation expectations are up. It is not surprising if the pundits keep talking about problems arising from mass deportations and big tariffs that the general population factors in that scenario. We think the effects have been exaggerated not least because some of the measures will not be implemented – or will be quickly removed.

Markets are only pricing in one or two more interest rate cuts in the US this year and up to three more in Australia. US inflation (excluding shelter) has been on target for many months, but fear of the unknown exacerbated by Trumps policies and style of governing is unnerving many. If there are a few months of ‘reasonable’ Trump policies being enacted, the Fed could start cutting interest rates again.

Asset Classes

Australian Equities

The ASX 200 fell sharply (-4.2%) over February but the selling was not across the board. Indeed, four of the eleven sectors witnessed healthy gains. This behaviour is symptomatic of a sector rotation and not a panic sell-off.

The index is up 0.2% for the year-to-date. The financial (FY25) year-to-date witnessed gains of 5.2% which is a very reasonable return given past historical averages.

In essence there has been a big momentum rally over the last two years and it seems investors are now searching for the next big theme.

International Equities

The S&P 500 also lost heavily over February before recovering somewhat in the last couple of trading hours (-1.4%). The DeepSeek launch seems to have triggered a sell-off of the Mag 7 stocks but there has been plenty of interest in non-tech sectors.

The German share market index the DAX (+3.8%), London’s FTSE (+1.6%) and the Shanghai Composite (+2.2%) swam against the US tide.

Bonds and Interest Rates

Doubt surfaced towards the end of February that the Fed might not have successfully engineered a ‘soft landing’ (lowered interest rates without having an economic recession) for the US economy. The 3-month to 10-year bond yield spread (differential) on Treasurys inverted again (the yield on 3-month securities is higher than the yield on 10 year securities). Whilst this ‘inversion’ is touted as a precursor for a recession it didn’t work as an indicator of a

recession in 2022 – and a few times before – so we are not in the recession-is-imminent camp but nor are we saying that a recession will not happen we are keeping an open mind and monitoring data and events closely.

The market has walked away from the US Federal Reserve’s (Fed) prediction of four interest rate cuts this year made in December 2024. However, the market is still expecting one or two rate cuts in the remainder of 2025 – and, maybe, even three.

With one interest rate cut under its belt, the RBA could be set for another two or three cuts this year, but a lot will depend on how the Trump tariffs and other policy machinations work out. There is too much ‘noise’ around to get a good feel for direction of the markets and economies.

The Bank of England (BoE) cut interest rates again in February – by 25 bps to 4.5%.

There is sufficient strength in Japan inflation to expect that the Bank of Japan (BoJ) will achieve its desired aim to get its interest rate up from the current 0.5% to 1% by the end of 2025. The decades of low inflation and even deflation now appear to be behind it.

New Zealand has a struggling economy, and the Reserve Bank of NZ (RBNZ) just cut interest rates at its fourth successive meeting – this time by 50 bps to 3.5%.

The Reserve Bank of India (RBI) just cut its interest rate for the first time in five years by 25 bps to 6.25%

Some have questioned whether the ’neutral rate’ that neither quickens nor slows the economy has increased in recent times. It was thought to be around 2.5% to 3% for Australia and the US before the interest rate hikes started post Covid. Some are now saying the neutral rate might be closer to 4%. We think this view might be misguided as the full force of the interest rate hikes has not yet filtered through to the real economy.

All four Australian major banks were quick to announce cuts to their mortgage rates – by 25 bps – after the RBA cut its interest rate in February.

Other Assets

Brent Crude Oil (-4.7%) and West Texas Intermediate Crude Oil (WTI) (-3.8%) oil prices were down in February.

The price of gold rose 1.5% in February.

The price of copper (+5.1%) was up sharply but iron ore prices (-1.3%) were down.

The VIX ‘fear’ index measure of US share market volatility rose to moderately high levels (21.1) towards the end of February as the possible tariff wars resurfaced, but it closed the month at 19.5. Given the intense concern over what Trump may or may not do, it is somewhat surprising that the VIX has not been trading higher. The market seems to be trading on the ‘Trump put’ – that he will take corrective action when necessary. There is the common belief that he judges his success by the state of the market.

The Australian dollar (AUD) traded in a wide range ($US0.6116 to $US0.6397) over February but finished flat.

Regional Review

Australia

Australia must hold a general election by mid-May. Whoever wins the election will be faced with an uphill task to breathe life back into the economy. As population growth slows, it will become even more apparent that economic growth has stalled.

However, the jobs numbers just out for January seemingly painted a rosy picture of the health of the labour market. The unemployment rate only rose to 4.1% from 4.0% and 44,000 new jobs were created. We believe the faster-

than-usual population growth, together with the rapidly growing NDIS scheme is masking the poorer level of health of the economy.

Retail trade grew over the year by 4.6% but that is reduced to 1.1% when price inflation is taken into account. The volume of sales are growing at about half of the pace of population – we are consuming less per person on average than a year ago.

CPI inflation was in the middle of the RBA target range, but electricity price inflation was -11.5% because of the way the ABS is trying imply a price inflation figure from a fixed-dollar subsidy per household.

The wage price index rose 3.2% over the year or 0.8% after price inflation is accounted for. Wages, after being adjusted for inflation, are still about 6% less than in 2020 as the pandemic began.

China

China needs to expand its stimulus package. Last year, growth came in (exactly) on target at 5.0% and 4.7% is expected for 2025.

A lot will depend on how China and the US interact over the tariff and trade situation, and the related tensions that have escalated recently.

US

The nonfarm payrolls (jobs) data came in at an increase of 143,000 from an upwardly revised 307,000 in the prior month. The unemployment rate was 4.0% and wage inflation was 4.1%. We note many of the created jobs are in the government sector.

December 2024 quarter economic growth was only minimally revised in the first of the two planned revisions each quarter. December quarter 2024 growth stands at 2.3% compared to the 3.1% recorded in the September 2024 quarter. Per capita real disposable income was revised down for the December 2024 quarter from 2.1% to 1.9%.

Retail sales were up 4.2% on the year or 1.2% after allowing for price inflation.

However, the Atlanta Fed, that publishes a regularly updated GDP forecast reported that earlier in the month their preliminary forecast for the March quarter 2025 was 2.3% but it fell to -1.5% on the Private Consumption Expenditure (PCE) Inflation measure report on the last day of February.

Trump has started so many initiatives it is not possible to report and discuss all of these in this update. We prefer to wait and see what actually changes before attempting to assess the implications.

Europe

The European Central Bank (ECB) continues to cut its interest rate and is expected to continue to do so. EU inflation rose to 2.5% from 2.4% but this is not, we believe, due to interest rate cuts. Rather, there are many factors at work in determining inflation. The EU economy is weak.

It was reported that the average German worker in 2023 took 19.4 days sick leave compared to 15 days the year before. The UK reported only 5.7 sick days in the same year. It was reported that the younger workers – GenZ – are struggling to keep up with the older workers.

German inflation came in at 2.8% for February after having been under 2% in September of last year. Rising inflation and a slowing economy are the preconditions for stagflation. It is too early to call that yet, Europe’s economy is struggling.

The BoE cut its rate to 4.5% from 4.75%. UK growth was 0.1% in the December 2024 quarter following 0.0% in the September 2024 quarter.

Rest of the World

Trump started to negotiate directly with Russia over the Ukraine war. He started off without including Ukraine’s President Zelenskyy but when he did, in front of cameras in the Oval Office, the meeting got heated.

Trump blamed Zelenskyy for not wanting a cease fire and not thanking the US for its support. Trump campaigned on being able to negotiate a swift end to the war and he was visibly frustrated by Zelenskyy’s intransigence as he sought security guarantees as part of the deal. Trump all but threatened to withdraw support. Various European leaders followed up giving their support which has been lacking to date. Given the state of the European and UK economies, it is not obvious that they could match the support that the US has given to date.

The S&P 500 fell from about +0.5% before the discussion on the last day of February to -0.5% as Trump cancelled the press conference. A White House official reported (tweeted) that ‘Trump had kicked Zelenskyy out of the White House’ – with no official farewell. The index then rallied very hard to close up +1.6% on the session.

Trump also suggested that the USA should rebuild Gaza and resettle the current residents. That suggestion quickly lost traction as did the notion of taking charge of the Panama Canal, Greenland and turning Canada into the 51st state of the US. As they say, “The situation is fluid”

The cost-of-living pressures are hurting everyday Australians and it doesn’t look like it’s going to get better anytime soon. From groceries to petrol to bills, everything is going up and we are all chasing our tails trying to keep up.

In times like these, safeguarding your wealth is pivotal by adapting some simple financial strategies. Here are a few practical strategies that can be used in protecting you and your family against inflation to strengthen your financial foundation for the future.

1. Know where your money is going (tracking your spending)

When costs are on the rise, every dollar saved counts, and tracking your spending is the best way to know exactly where all your money is going. Are you paying for streaming services that you don’t use? Or maybe you are eating out more than cooking at home? Going through your bank and credit card statements is a great way to identify what has been spent, and determine areas that can be cut back. Lowering these discretionary costs won’t make a major difference to your lifestyle, but will reduce the financial strain.

2. Invest in Real Assets

One of the best ways in protecting yourself against inflation is to invest in real assets as these are known to appreciate in value over time. Investing into residential, commercial or industrial properties can deliver capital growth, along with ongoing rental income which will provide a dependable hedge. Additionally, commodities such as gold, silver and oil are also known for performing well in inflationary environments, with their prices rising in line with inflation. Investing in the physical commodities, or through commodity-focused ETFs and mining stocks will allow you to gain exposure within this asset class.

3. Diversify your Portfolio

Having diversification across asset classes and geographies can help in mitigating your risk. If one asset was to be impacted, you will still have others that may be performing better. Expanding out of the Australian’s market and looking at some global investments in countries with a lower inflation rate can provide a nice balance along with additional growth. Alternative assets such as private equity or infrastructure projects can also offer a shield against your wealth as they are less correlated with traditional stock markets.

4. Consider Inflation – Protected Investments

Specifically designed to help preserve your wealth during times of rising prices, inflation protected investments ensure that your purchasing power isn’t affected by adjusting their value in line with inflation. Government bonds such as Treasury Inflation-Protected Securities (TIPS) are designed to keep pace with inflation so your investment is able to uphold its purchasing power. Additionally, inflation-linked bonds offer returns that regulate in changing economic conditions that further enable you to protect your income from the effects of inflation.

While inflation can erode purchasing power, making it difficult to maintain your lifestyle, these effective solutions can help in protecting your wealth and ensuring you are well prepared for the economic challenges ahead.

In todays fast-paced world, it’s easy to sacrifice sleep in the name of productivity. Something as crucial as breathing, and as vital as eating, somehow seems to get overlooked and its importance slowly slips away from us.

Sleep isn’t just about resting, its about our bodies and minds recharging so that we can be the healthiest versions of ourselves. Not to mention, sleep plays a crucial role in keeping us sharp, focused and productive at work and in our day to day lives.

According to Professor Siobhan Banks, we are seeing a significant number of our population getting less than six hours a sleep a night, and this is leading to all sorts of issues with productivity at work, sleepiness leading to accidents on the road, and of course major health issues.

So, if you are not getting enough sleep, here are some simple yet effective tips to help you rest easy and wake up feeling refreshed.

1. Consistent Sleep Schedule

Setting yourself a consistent time to fall asleep and wake up each morning, even on the weekends, is key. This allows your body to regulate your internal clock which in turns makes it easier to fall asleep at night, and aids in waking up naturally each morning.

2. Create a Sleep Friendly Environment

If you want a good night’s sleep, it is important to set yourself up in the right environment. Ensuring your bedroom is dark, quiet and cool will help your body relax and drift off to sleep. White noise can also be helpful in distracting the mind to switch off, and if possible, limit the amount of electronics in the room to mitigate any distractions.

3. Turn off Screens Before Sleeping

Whilst we live in a world full of screens, the blue light from our TVs, computers and phones are causing harm to our sleep. Try turning off all screens at least one hour before bed, and try calming activities like reading, which signal to the body its time to wind down.

4. Monitor Your Food and Caffeine Intake

What you eat and drink leading up to bed time can have a significant impact on the quality of your sleep. Try not eating large meals before bed, and limit your intake of caffeine and alcohol as these substances can stay in your system for numerous hours leading to disrupted sleeping.

5. Exercise Regularly

Maintaining a regular exercise regime can significantly improve your sleep as physical activity helps to regulate the body’s sleep-wake cycle. However, it is important not to undergo vigorous exercise right before bed as this can have the opposite effect, making sleep difficult. Try and aim for a morning walk, or an afternoon workout.

Getting enough sleep is essential in maintaining both your physical and mental health. By following these few tips and tricks to prioritise your sleep, you will soon enough see the improvements in your sleep quality, feel more rested in the mornings, and be more productive during your day.