Unpacking 2023: Household Finances, Inflation, and Property Markets

Hello, Ben Kingsley here, and wow, it’s been a mega year again.

A very, very fast year that has been the year 2023. And as I reflect on that year, the real big theme to me has been the economy and also very much the cost of living. Everything’s costing more and I wanted to bring that theme through in my Christmas message in terms of looking at some of the reasons why we’re here and also what we might be able to expect in early 2024.

And then also, as a tradition for our new customers who have joined us and for our valued existing customers, let’s go through some of the numbers regarding the new people who have joined us and we’re very humbled to be able to serve them.

So let’s firstly just talk about the big theme around how we are, where we are in terms of the economy and in terms of our cost of living and how basically everything’s going up.

Rising Cost of Living

So to paint the picture, what I want to talk about here is the impact in terms of what actually happens. If we cast ourselves back to the pandemic period, we obviously knew that the government and those people who looked after fiscal and monetary policy needed to stimulate the economy as much as they possibly can.

If you think about the economy as one huge flywheel, the risk was we didn’t want that flywheel to slow down or stop because it’s incredibly difficult to continue to keep building that economic flywheel.

And so we saw a lot of stimulus go into the economy, both from the government, but also in regards to what the Reserve Bank did. This chart here in front of you now is the Australia’s cash rate chart. You can see there when the pandemic hit, we went to a record low or emergency level cash rate of 0.1 of 1%, and it was through that period that things started to change.

When money starts getting cheap, what we basically see is we can see a good story here looking at this chart from the RBA, and we can see consumption in the orange, and effectively consumption stopped as everyone was locked down in those earliest stages of the pandemic. And so what we do see when people are stopped from moving and also consuming is we saw disposable income go up because we also got stimulus from the government, but we couldn’t spend it on anything.

That’s why I also like the savings ratio chart underneath that because there’s an inverse relationship immediately between consumption and savings. We were able to, through that pandemic period in those lockdown periods, to increase our savings for a couple of reasons. One, we weren’t able to spend, which I mentioned a second ago, but also the cost of money went down.

So all of those people with mortgages, you saw record low interest rates. And that meant that we were able to spend less on interest and other expenses. And if we couldn’t consume it or spend it elsewhere, we basically put it into our savings accounts or our offset accounts and so forth. So this really does highlight that.

Now what you can also see here is as the cash rate has been going back up, what that also means is this. You can see here that movement in disposable income drops significantly and that’s a natural cause. Basically, they’re taking all of our money away from us, and we’re paying that in terms of higher mortgage repayments and higher interest costs. And then you can start to see, we still wanted to go out and spend. You know, we did a lot of revenge spending on travel and just getting back and starting to live again after we had those disruptions for at least 24 months as part of that story.

So 2023 was the year we moved past that.

But obviously we did see something significant thing happening in regards to inflation. Now it was triggered early by the supply shocks, and then obviously Russia invading Ukraine. We also had some real spikes in food prices and energy costs and so forth as the world started to grapple and compete for those limited resources around gas and oil and so forth. That was the start of that inflation story and the story in terms of that.

But what we’ve also seen on the back of that is that businesses, prior to this inflation genie jumping out of the bottle, they were cautious about putting their prices up. They didn’t think consumers were willing to go out and continue to keep spending.

But guess what? They did.

And once they worked out they did, they were very happy to continue to pass on those costs. And so while unemployment remained low and employment was high, we had all this pent-up demand, and they were able to pass on all of those costs to us as consumers as part of that story.

That’s why we’ve got this high inflation story, and that’s ultimately what has led to these 13 increases since May of 2022 in terms of that cash rate. And that’s obviously meant that we’ve had a lot of movement in regards to our costs and challenges around that.

Now, you couple that with obviously higher general transport costs, energy costs, all those input costs. And we have seen a very, very challenging year when it comes to that additional disposable income.

Australian Housing Market in 2023

But what we also saw is the property market in 2023.

A lot of people thought the property market was going to decline, go backward, continue to keep falling. But what they didn’t understand was the lower demand and supply in the short term. And so supply really dried up, but demand was able to be stabilized through gainful employment.

And so what we did see overall is an increase of around 7% in terms of the dwelling values across Australia. Now that’s obviously a guide. And so what I wanted to show you is each of the different capital cities so you can see Sydney, Melbourne, Brisbane, and Adelaide here. And, and so obviously some of those markets have done better.

Melbourne being the most challenged market with all of its additional costs and charges and the appetite for people to invest in Melbourne in the short term is being challenged. But you can see both Brisbane and also Adelaide having really good times of it. And then you can also see here what’s happening in Perth, Hobart, Darwin, and the ACT.

So Perth is by far the standout market at the moment. There’s a lot of it that’s very affordable. So all of the changes around borrowing power have meant that Perth remains very affordable for owner-occupiers but also for investment. And it’s got good, high disposable incomes, got a very strong economy, and so you’re seeing that market outperform compared to the others.

You see that obviously there have been losses in Darwin and also pretty flat markets in the city and also Hobart.

So we ran out the year looking like this and always we need to be reminded that in terms of residential estate, real estate underpins the Australian wealth story here.

$10.3 trillion worth of real estate value in this country, 11.1 million dwellings, there’s $2.2 trillion of outstanding mortgages. And so 56.6% of our wealth is trapped inside our properties, and you can see the sales volume there significantly lower. We sort of saw sales volumes prior to that period where money was cheap, over 600,000 transactions occurring in that time. That just gives you some idea of that particular story. So there you go. That summarizes sort of the moving parts in terms of how we got to where we are from an economic theme. That’s sort of my main theme for this year.

Early Predictions for 2024

And if I think about what’s going to happen in 2024, I suspect with the cost of money still remaining quite high in the first half of the year, it’s going to be a little bit more challenging, and the economy will further slow. And that is good news to obviously get that inflation story back under control.

And then hopefully in the second half of next year, we’ll start to see the cash rate come down, which will make money a little bit cheaper. And then ultimately, hopefully, we’ll gain or retain as many of our jobs as we’ve got in the economy so that the economic flywheel continues to move in a healthy direction.

Now I mentioned earlier about how thrilled we are and how humbled we are to be able to serve our new customers and new clients in 2023.

So if you’re new to us, thank you for entrusting us to be your stewards and help guide you on your wealthier tomorrow building journey that you’re on. Obviously, if you’ve been long-term customers of ours, we’re delighted to serve you. Hopefully, we’ve done some further guidance work for you in 2023, and if we haven’t or if there’s something we need to do for you in 2024, we really look forward to that opportunity to serve you.

As I’ve done traditionally in a lot of these updates, I’d like to just share some of the numbers in terms of the work of our brilliant team and some of the activities that I’ve been doing throughout the course of the year.

Property Wealth Planning

So starting with our Property Wealth Planning team who do the property investment advisory and planning work where we delivered over 700 Property Portfolio Plans and also performed 60 different reviews and tweaks to some of those existing plans for our clients in terms of property recommendations.

Well, just as an example, in the 2023 year, there were $344 million worth of recommendations in terms of property purchases. So we’ve been very busy in terms of not only planning to become what we plan to become, but also executing on that.

We also have a nice little milestone for that team throughout the course of 2023. In total, 4,000 plans have now been delivered throughout the lifetime of those services that we offer. So that’s a nice little milestone internally for those 4,000 customers and households that we’ve served as well.

Mortgage Broking

In terms of our mortgage broking team. Well, in most cases, people have to borrow money if they’re acquiring property and so our mortgage broking team have been super busy, and I’m delighted to announce, you know, we won the most prestigious mortgage broking award in the country from the Australian Mortgage Awards and we were recognised as the Best Brokerage Business in Australia. We also won the Champion Broker Group for VIC/TAS from Australia Finance Group Broker Awards for the second year in a row. So that is a huge honor for the team as well.

In terms of the actual numbers, we submitted 2,260 loan applications to the value of $1.475 billion worth of mortgages for our clients over that time. And then obviously that correlates into some of the action and implementation work that we do.

Buyers Agent

When it comes to property purchases and success stories, our buyer’s agency team has been super busy in terms of acquiring those properties throughout most parts of Australia.

We’ve been actively buying in Victoria, Queensland, South Australia, and Western Australia throughout the past 12 months. And so we’ve purchased coming up to a circling in on around 400 purchases for the year and a rough market valuation of those properties is around $290 million.

Financial Planning

In terms of our financial planning business, we also had a busy year in looking after over 1,500 clients with their personal insurances and policies.

That’s not all. We are also managing the investments of our clients in terms of their superannuation or any investment funds that they’ve got under our management. And so we have around $220 million worth of funds under management in terms of looking after those clients.

Tax & Personal Accounting

And finally, our very tax team, which we’re also super proud of, have had an incredibly busy year, both Danish and Saqib have been doing really, really well with over 1,200 tax returns for our clients.

We obviously specialise in residential property investment and personal tax returns. And so they’ve been super busy in terms of looking after our client base in delivering over 1,200 of those tax returns.

The Moorr Platform

Turning our attention to our Moorr platform, it’s been a big, big year for the Moorr platform. Obviously, we’ve got the mobile app on Apple Store & Google PlayStore but we’ve also the web version of the platform, and it really is a cornerstone piece of our client portal work that we do with our customers, people like yourselves, in terms of making sure that they’ve got a home for all of their financial information and then they can manage their money management and also their properties through all in one platform.

We have very, very big plans in terms of turning Moorr into a must-need, must-have tool for all of our clients. But we’ve also extended that to the general public, to use that platform as well to help them, again, manage their money and also manage their property portfolios if they have any. It’s free to create an account in Moorr here.

Some of the highlights for the year have been the WealthCLOCK and WealthSPEED launch, and it really is a next-generation financial insight tool.

These two features sort of highlight your opportunity or problem really quickly by putting all your financial information there and saying exactly where you sit in terms of how hard your money is working for you.

We also recently upgraded the core engine, the financial engine that sort of runs everything. So all of the financial information that’s taken in is now in an area we call MyFINANCIALS, and it’s really a clearer way of being able to understand where all your money is allocated to and the targets that you’re setting yourself for annual spending and the like.

And so there are some exciting plans that we have coming up in the New Year in terms of supercharging the insight and the value in terms of how we share that information. There’s a lot more exciting announcements that we’ve got to make, hopefully as early as February next year, with the latest release of our insights and historical tracking data that you’ll be able to access inside the platform.

Now, we also hit a pretty important milestone over the course of the year, now close to 50,000 people who have registered to use Moorr.

And so we’ve obviously got to continue to keep encouraging them and giving them value to be able to do that as well as serve you as our valued Empower Wealth clients in terms of providing the value and all of the benefits that you need in terms of the features and the toolsets that we provide inside that platform.

We are not going to rest any time soon when it comes to the platform. We are investing heavily into that platform to make it really easy for you to organise your finances and manage those finances so you can get a good sense of where you’re at, where you’ve come from, and ultimately where you’re going. So that’s a wrap-up of the internal exercises and work we’ve completed.

And again, this is the best part for me. This is where I get to say, again, a huge thank you for entrusting us with your money and your plans as we try and build wealthier tomorrows out for you and hopefully help you cultivate your Lifestyle by Design.

That’s the important work that we get to do here so we’re very humbled with that responsibility and that opportunity. And so I want to say a very, very Merry Christmas to all of you and to say how grateful we are to be able to serve you. I wish you and your family the very, very best over this festive season.

Yes, there are some people doing it tough out there so we’re always mindful of those and we’re very grateful in terms of the opportunity we have to live in this great country and to also, you know, be able to spend some time with loved ones around this time as well.

In terms of 2024, I wish you all a very, very prosperous, new and exciting year. And I hope that you’re able to take action because like I’ve always said, knowledge is empowering, but only if you act on it.

Hopefully you can start to think about the goals you want to achieve. And if we can be a part of that in any way to help guide you to minimise the mistakes or optimise the opportunity for yourself, we’ll be glad to help. So thanks again. All the best for a merry Christmas and a Happy New Year.