The Bank of Mum and Dad is Under Pressure

December 03 2021

"If you are a parent considering putting a new roof over your children's heads, make sure you don't lose your own! Check out this article to learn more about the rise of the Bank of Mum and Dad." - Marco Zande, Strategy Executive 

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The bank of mum and dad is under pressure, and the Aussie ETF market goes gangbusters. Here are five things you might've missed this week.

RBA doubles down on climate change threat 

Reserve Bank of Australia deputy governor Guy Debelle has labelled climate change a "first-order risk for the financial system."

"It has a broad-ranging impact on Australia, both in terms of geography and in terms of Australian businesses and households. Most Australian financial institutions now recognise climate as a risk," he said at the CFA Australian Investment Conference.

"The assessment of climate risks has evolved considerably over the past five years, but there remains considerable scope for further improvement.'

Investors will need to adjust their portfolios accordingly, lest they get left behind as the world moves towards carbon zero.

"These [measures] are effectively increasing the cost of emissions-intensive activities in Australia. So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that. The material risk is that these forces are going to intensify from here."

Bank of mum and dad under pressure from property boom 

Record property prices are weighing on the bank of mum and dad, with Mozo research showing that helping children buy property has left two thirds (67%) of parents feeling like they are under significant financial stress.

The latest ABS Residential Property Prices index shows the average Australian home is now selling for $835,700. Meanwhile, the average parental contribution to a child's property has increased 83% from $73,522 to $134,200.

"As property prices continue to rise across the country, first home buyers are looking for any assistance they can get, including asking their parents to help them buy a property," says Mozo spokesperson Tom Godfrey.

"Whether it's gifting money towards a deposit or helping kids make mortgage repayments, parents are the silent force behind a large number of children getting into the property market."

More dine and discover vouches offered to nsw residents 

New South Wales residents will have access to two additional dine and discover vouchers, in addition to the four previously provided.

"We experienced the success of the Dine & Discover program when we reopened last time, which is why we are doubling down efforts with an additional two $25 vouchers - one for Dine and one for Discover venues," Mr Kean said.

"We are backing our businesses and helping hip pockets by expanding the program, in addition to extending existing vouchers until the end of June 2022."

NSW residents aged 18 years and over who are yet to apply will be able to do so until the program ends and will receive all six $25 vouchers.

Stagflation imminent 

A growing chorus of experts are warning investors of the possibility of imminent of stagflation - defined as simultaneous low growth, high unemployment and high inflation.

"Inflationary pressure are building around the globe with increasing talk of stagflation as energy prices rise and after the US Fed warned overnight of rising prices and the risk of persistent inflation due to supply constraints," says Neiron.

"The oil shock of the 1970s may seem a long time ago, but with oil close to reaching US$100 a barrel, coking coal trading at record highs, we may see similar stifling economic conditions emerge in the coming year as the prices of basic goods climb in response to stronger demand and supply bottlenecks."

Stagflation is bad news for many asset classes, but good news for others.

"In this scenario, of rising rates, and high energy prices, gold will shine. Value shares will also likely outperform. Woodside has already seen its share jump 25% in the last month alone, and Santos is up by 20% against falls for the S&P/ASX 200. That strong run will likely continue and gold miners could join that run," says Neiron.

Australian etf market has best quarter on record

Australian exchange traded funds (ETFs) had their best quarter on record, according to the latest figures released by the Australian Securities Exchange (ASX) and Vanguard, with $9 billion in cash inflows.

"It's encouraging to see such uptake of ETFs," says Minh Tieu, Vanguard's Head of ETF Capital Markets, Asia-Pacific.

"If this momentum continues and we stay on the same growth trajectory as the last few years, we estimate the Australian ETF industry will reach the next $100 billion of assets under management in half the time it took to reach the first $100 billion - which would be a remarkable feat".

Global equity ETFs led the pack, posting $4.9 billion in inflows in Q3 2021 and $10.9 billion year to date as at September 2021.

"With travel restrictions still in place, Australians are going overseas a little differently this year by pouring into ETFs that target exposure to international markets," says Tieu.

"Whether it's because they're optimistic about the global economic recovery or simply wanting to diversify away from home markets, more funds are flowing into international equity ETFs this year than into Australian equity ETFs".

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Source: Money Mag 

Thornton, D. (2021, October 15). The bank of mum and dad is under pressure: What you've missed. Money magazine.