Jacqueline Barton

Dozens of Australian businesses have gender pay gaps above 50%

According to the Australian Bureau of Statistics (ABS), Australia’s national gender pay gap is 12%. As of November 2023, the full-time adult average weekly ordinary time earnings across all industries and occupations were $1982.80 for men and $1744.80 for women. In other words, for every 100 cents on average men earned, women earned 88 cents. That’s $238 less than men each week. Over a year, this difference adds up to $12,376[1].

The ABS data:

• estimates full-time weekly base salary employees in the public and private sectors,
• excludes overtime, pay that is salary sacrificed and superannuation,
• excludes junior and part-time employees.

Australia recently, for the first time, released data[2] reflecting the gender pay gap of every private company with 100 employees or more, at nearly 5,000 companies. Dozens of these Australian businesses have gender pay gaps of over 50%. These pay gaps are not reflective of companies paying male and female employees different amounts for the same work (which has been illegal for more than 50 years), but mostly represent men working in higher-paid roles within a company. More than 3,000 employers, or 61.6%, had a gender pay gap that favoured men. Meanwhile, 30.1% (1,493 employers) had a neutral gender pay gap, defined as a gap of 5% or lower, and just 412 employers, or 8.3% of the total, had a pay gap that favoured women[3].

The Workplace Gender Equality Agency (WEGA) explains its methods for calculating the pay gap as follows: WGEA used remuneration information supplied by employers in the 2022-23 employer census to calculate employer gender pay gaps. Part-time and casual salaries are converted into annualised full-time equivalent earnings. This year, the data excludes salaries of CEOs, heads of business, casual managers, employees who were furloughed, and employees reported as non-binary, as this comparison is between women and men.

State gender pay gap data

Australia’s base salary gender pay gap differs significantly by state. As of November 2023, the gender pay gap is[4]:

• 11.0% in New South Wales
• 10.7% in Victoria
• 11.5% in Queensland
• 9.2% in South Australia
• 21.7% in Western Australia
• 5.4% in Tasmania
• 15.4% in the Northern Territory
• 10.3% in the ACT

These differences can be partly explained by the industry profiles of each state and territory. The full-time workforce in Western Australia, for example, has a larger share of mining and construction than in other states. These two industries have relatively high earnings and low representation of women.

Industry gender gap gaps

Australia’s base salary gender pay gap is[5]:

• highest in Professional, Scientific and Technical Services
• lowest in Public Administration and Safety.

In the past year, the ABS data shows significant reductions in the gender pay gap in Construction, Transport, Postal and Warehousing, Retail and Wholesale Trade.

However, increases were recorded in Professional, Scientific and Technical Services, Arts and Recreation Services, Manufacturing, Electricity, Gas, Water and Waste Services, Accommodation and Food Services, and Other Services.

[1] https://www.wgea.gov.au/data-statistics/ABS-gender-pay-gap-data

[2] https://www.wgea.gov.au/data-statistics/data-explorer

[3] https://www.theguardian.com/world/2024/feb/27/australia-gender-pay-gap-new-data-wgea-men-women-salary-difference

[4] https://www.wgea.gov.au/data-statistics/ABS-gender-pay-gap-data

[5] https://www.wgea.gov.au/data-statistics/ABS-gender-pay-gap-data

The first quarter of 2024 saw the Government roll out considerable changes to the Stage 3 Tax Cuts, inflation continuing to slow but remaining stubbornly high across some areas, surging stock market highs and continuing pressures in the property sector.

Government Overhauls Stage 3 Tax Cuts

In January, the Labor government unveiled changes to the proposed stage 3 tax cuts, aimed at providing bigger tax cuts to middle Australia. The new changes, which passed the Senate to become law in February, retain the tax bracket that would have been scrapped under the original proposal and adjust tax rates to benefit both lower and higher-income earners.

The changes will take effect from July 1 and are summarised as follows:

Inflation continues to ease

Inflation continues on a downward trend, with the RBA expecting it to return to the target range of 2-3% in 2025 and reach the midpoint in 2026.

Service price inflation remains high despite goods price inflation decreasing, supported by continued excess demand and strong domestic cost pressures.

The RBA expects the consumer price index (CPI) to come in at 3.3% by June, compared with 3.9% forecast three months ago. As a result, the board decided to leave the cash rate unchanged at 4.35% at the first official meeting for the year.

Share Market Highs

Global share markets have been breaking records this quarter, with the ASX200, S&P500, Eurozone and Japanese markets reaching record highs, helped by US inflation data coming in as expected, leaving the US Federal Reserve on track to cut rates from mid-year.

Whilst economic growth both locally and globally is forecast to slow, there is optimism in the market as inflation has started easing and is likely to continue falling. Central banks across the US, Canada, and Europe are expected to start cutting rates in the coming months. Recession still looms as a risk, but it appears the economy may be moving toward a soft landing.

Housing market continues to tighten

The national vacancy rate fell to a new low of 0.7% in February, highlighting the ongoing supply and demand challenges in rental properties across Australia, as a result of a construction sector under strain, rapid population growth from migration, and rising urban property prices.

Whilst the government has put stricter measures on international students to try to ease demand pressures, supply continues to be an issue, with building approvals falling by 15 in January, though multi-unit dwelling approvals increased by 19.5% in the same period.

Property prices continued to rise despite higher interest rates, inflation and cost of living concerns. The Home Value Index was up 0.6% nationally in February and showed an increase in all capital cities except Hobart.

Labour market cooling

Labour market conditions cooled over the December quarter 2023, with an ongoing shift away from full-time employment, growth in part-time jobs, and a decrease in recruitment activity. These trends are consistent with Treasury forecasts that growth will continue to ease, and the unemployment rate will increase from 3.9% in January to 4.2% by June, and 4.3% by the end of the year.

Despite clear softening, labour market conditions remain tight, and many employers are experiencing challenges finding suitable workers to fill positions, while some shortage pressures remain evident.

In the ever-fluctuating world of economics, recessions are an inevitable part of the financial cycle. While they can be daunting, understanding their nature and preparing for their impact can make a significant difference in weathering the storm.

Understanding recessions

At its core, a recession represents a period where economic activity reduces, often reflected in consecutive quarters of negative GDP (Gross Domestic Product) growth. This reduction is not just a statistic on a chart; it is felt across various facets of the economy.

Employment opportunities might become scarcer, leading to job losses or reduced working hours. Households might witness a dip in their income levels, which in turn affects their purchasing power. Consequently, consumer spending, a significant driver of the economy, takes a hit.

The onset of a recession can occur for various reasons, and often it’s a combination of several factors rather than just one event. High inflation rates, for instance, can reduce the value of money, prompting consumers to cut back on spending. Additionally, rising consumer debt can be problematic. While borrowing can boost economic growth in the short term, too much debt can lead to payment defaults, affecting both households and the banks they borrowed from.  Moreover, unexpected events, such as a global health crisis, can interrupt business operations and reduce consumer demand, leading to economic downturns.

It’s the mix of these local and global factors that highlight the intricate nature of recessions and the importance of understanding them.

Preparing your everyday expenses

1. Budgeting: A well-planned budget or spending plan is the cornerstone of financial resilience. Track your monthly income and expenses, prioritise necessities, and cut back on luxuries. This will help you save and give you a clear picture of where your money goes.
2. Debt Reduction: High-interest debts can cripple your finances. Focus on paying off high-interest debts first, like credit card balances. Consider consolidating your debts or negotiating with lenders for better terms.
3. Emergency Fund: An emergency fund acts as a financial cushion. Aim to save at least three to six months’ of living expenses. This fund can be a lifesaver if you face job loss or unexpected expenses.

Fortifying your savings

1. Automatic savings: Set up an automatic transfer to your savings account each month. This ensures you’re consistently saving, making it less tempting to spend that money elsewhere.
2. Diversify your savings: Don’t put all your eggs in one basket. Consider diversifying your savings across different accounts or financial institutions. This can protect your money from bank failures or other unforeseen events.
   3. Liquidity is key: In uncertain times, having access to your savings can be crucial. While long-term deposits or high-yield accounts might offer better interest rates, ensure a portion of your savings is in easily accessible accounts, like a regular savings account or a money market account. This ensures you can quickly access funds without penalties or waiting periods should the need arise.

Navigating investments

1. Review your strategy: Re-evaluate your investment strategy considering the current economic climate. Ensure your portfolio aligns with your long-term financial goals.
2. Seek professional advice: Consult a financial adviser if you’re unsure about your investments. This is not the time for hasty decisions. As your adviser, we can provide insights tailored to your situation and help you make informed decisions.
3. Avoid impulsive moves: Feeling anxious during economic downturns is natural. However, making impulsive investment decisions based on fear can lead to significant losses. Stay informed, be patient, and remember that recessions are temporary.

Recessions, while challenging, are a natural part of the economic cycle. By understanding their nature and preparing in advance, you can not only survive but thrive during these times.

Remember, the key is to be proactive, stay informed, and make well-considered financial decisions. With your financial planner and the right strategies in place, you can confidently navigate any economic storm!

Popular in the days before compulsory superannuation, investment bonds fell out of favour as super became the preferred tax-advantaged environment. With tighter restrictions on superannuation contribution limits and eligibility requirements, bonds might be worth a fresh look.

Investment bonds are a type of insurance policy primarily used as an investment vehicle. Available from a range of providers, investors can choose from a suite of underlying investments in much the same way as regular managed funds. Investment bonds shouldn’t be confused with interest-paying government or corporate bonds. They are a unique type of asset offering a range of advantages.

Tax advantages

The primary attraction of investment bonds is that earnings are taxed in the hands of the issuing company at a rate of up to 30%. Provided the bond is held for more than 10 years and the 125% rule is not breached, no further tax is payable when the bond is cashed in.

While 30% is more than the 15% tax rate that applies to superannuation earnings, it is less than the current marginal tax rates that apply to people with an annual taxable income above $45,000. The higher your marginal tax rate, the more attractive investment bonds become.

Moreover, investment bonds don’t lock up your money for the long term as super does. You can access your money whenever you like, but you need to be aware of some rules and tax implications.

If the bond is cashed out within eight years, all the growth in the value of the bond is included in your tax return. You will, however, receive a credit for the tax already paid by the issuing company. You won’t be double-taxed. Withdraw from a bond between eight and nine years, and two-thirds of the gain is declarable; and between nine and ten years, one-third of the gain goes into your tax return.

Bonds can be purchased with a single lump sum or with regular additions. However, to keep the original start date, an annual contribution cannot exceed 125% of the previous year’s contribution. If it does, the clock starts again for the 10-year rule. Another option is to simply purchase a new bond.

Additional benefits

Insurance bonds can be useful estate planning tools. As a form of life insurance, if the owner dies, the proceeds will be paid directly to nominated beneficiaries. The money doesn’t go through the estate and can be paid out quickly. In addition, the proceeds are not taxable in the hands of the beneficiaries, even if the bond is less than 10 years old.

Allowing for relevant tax rates, they may also be a good vehicle for saving for a child’s education or other long-term goal.

Timing

Due to their long-term nature, it isn’t just your current marginal tax rate that is important; it’s what your rate will be in the future. As many retirees pay little or no tax, particular consideration must be given to purchasing a bond that will be held until after retirement.

Suitability

Investment bonds aren’t for everyone, but they may suit investors who:

• have reached their contribution caps for super contributions or are no longer eligible to contribute to super due to age;
• do not wish to lock away their money in super;
• are saving for a long-term goal and have a marginal tax rate above 30%;
• have specific estate planning needs.

There is much more about investment bonds than we can cover here. As with any type of investing, there are risks involved with bonds, and these must be taken into account.

Contact us if you would like to learn more about how investment bonds could be part of your investment portfolio.

Diversification has several benefits for you as an investor, but one of the largest is as a strategy to reduce investment risk and to achieve more stable returns over the long term.

Diversification can lower your investment portfolio’s risk because different types of investments perform differently depending on the existing market conditions. Diversification lowers your portfolio risk because, no matter what the economy does, some investments are likely to benefit. For example, when interest rates fall, bond prices generally rise, and shares do less well at this time. If one business or sector fails or performs badly, (for example oil shares plummet or one fund manager fails), you won’t lose all your investments. By owning multiple assets that perform differently, you reduce the overall risk of your portfolio, so that no single investment can overly impact your overall returns.

How to diversify

You can spread your portfolio across different asset classes like shares, bonds, fixed interest, property, and cash.

Consider diversifying across industry sectors within asset classes to adapt to changing economic conditions. For example, if you buy shares, you could buy across a range of different sectors such as healthcare, resources, financials, retail etc.

Another type of diversification is by investing with different types of fund managers and product issuers.

Having a variety of investments with different levels of risk will also balance out the overall risk of a portfolio.

It’s worth taking the time to review your investments and look for opportunities to diversify.

Review your investments

List all your investments and what they’re worth. This could include:

• cash in a savings account
• shares
• managed funds
• an investment property
• your home
• your superannuation.

This will highlight which asset classes you’re currently invested in and where you could diversify.

Identify gaps and research other asset classes

If most of your money is in one or two asset classes, research other asset classes. For example, if you own a house, an investment property won’t help you diversify. To diversify, you could invest in different asset classes such as shares or bonds.

You can achieve a balanced portfolio with the right mix of investments, even with a modest amount to invest.

A simple way to diversify is to invest through a managed fund, managed account, exchange traded fund (ETF) or listed investment company (LIC). Managed funds and managed accounts can help you invest across a range of asset classes and/or fund managers. ETFs and LICs can also provide a low cost way to invest in an asset class or diversify within an asset class.

Contact us today to find out more about how you can diversify your investments to help achieve your goals.