A FinSec View – Market Updates, Your Wealth Transfer plan, The Economic Summit Overview & more….

The Reserve Bank of Australia has downgraded its long-term outlook for productivity growth and warned the economy cannot sustainably grow faster than 2% per year, in a reality check a week before Treasurer Jim Chalmers’ Economic Reform Roundtable, where the government will discuss ways to boost productivity in a closed-door meeting with selected stakeholders, including businesses and unions (see our overview below).

Announcing a widely anticipated decision to cut the cash rate from 3.85 per cent to 3.6 per cent on August 12 – the third reduction for 2025 – the RBA said it now believed productivity would grow by just 0.7 per cent per year over the medium term, down from its previous assumption of 1 per cent. The Australian Financial Review noted that the decision was the first time since the pandemic that the central bank has lowered its assumption for productivity growth, which influences its broader economic forecasts.

The RBA warned that weaker productivity growth meant the economy would be smaller and poorer than would have otherwise been the case over the long term, with lower consumer spending, less investment and weaker tax revenues. Bond traders immediately started pricing in further rate relief in coming months.

The AUD felt immediate pressure from the rate cut (0.65 US cents). Our currency has already been on a downward trend against the US dollar and slipped further after the RBA’s announcement, reflecting the growing interest rate differential between the two economies.

Consumer confidence, while still subdued, improved slightly on the back of lower inflation figures in late July, nurturing hopes that cost-of-living pressures might begin to ease.

Sector-wise, the market has experienced a notable shift of capital. Mining was a standout performer, with major players like Fortescue, BHP, and Rio Tinto significantly outperforming the broader index. This was mainly driven by a recovery in iron ore prices, which rose above the psychologically significant US$100 per tonne mark. Strong operational updates from these companies and a shift in investor focus from banking stocks to resources helped fuel the rally. The energy sector also has also being doing well, supported by higher oil prices and steady LNG exports.

Financials traded in a narrow range, with the Big Four banks balancing robust mortgage portfolios against a backdrop of slower credit growth. ASX darling, CBA, this week announced it has delivered a record cash profit of $10.25 billion for the full-year, up 4%, as it grew home loan and business lending and improved credit quality. The result was in line with analyst expectations. CBA, which represents around 12 per cent of the value of the S&P/ASX200, will pay a final dividend of $2.60 per share, bringing the total dividend per share to $4.85, fully franked.

As the August company reporting season gets underway, analysts are closely watching for signs of how the rate cuts and easing inflation are translating into improved consumer spending and corporate outlooks.

The residential property market maintained a steady recovery, particularly in Sydney and Melbourne, where auction clearance rates picked up. Regional markets also remained solid, benefitting from ongoing infrastructure projects.

Overall, the market’s performance over this period suggests a resilient economy that is gradually finding its footing in a low-interest-rate environment, even as it grapples with global trade uncertainties.

Global share markets have continued to rise, driven by a rebound in US mega-cap stocks and strong earnings results. There has been a noticeable divergence between regional markets in recent weeks, with key indices in the US, Europe, and Asia all posting gains.

The US Federal Reserve kept interest rates steady, but expectations for a September cut and more by the end of the year have grown stronger. US consumer prices rose moderately in July, although increased costs for services like airline fares and certain tariff-sensitive goods such as household furniture led to a rise in core inflation, marking its biggest increase in six months. A mixed report from the financially strained Bureau of Labour Statistics, which indicated some deterioration in labour hire, has not tempered hopes for a rate cut in September.

Economists have warned that higher prices from Trump’s sweeping tariffs are still expected. Businesses have been actively unwinding their earlier “front-loading” activity or selling off the goods they accumulated earlier this year in anticipation of Trump’s import duties coming into effect. JP Morgan Research has indicated a high likelihood of a US recession in the second half of 2025. Despite this, corporate fundamentals are expected to remain strong, with earnings growth projected to reaccelerate into 2026.

The S&P 500, Nasdaq, and Dow Jones have all experienced recent gains, led by stronger-than-expected Q2 earnings and progress in international trade deals. AI-related stocks drove US earnings surprises, with US shares outperforming those in Europe, excluding the UK, and Japan, as European earnings outlooks weakened due to a strong euro and 15% tariff worries. Trump has extended a pause on the sharply increased tariffs on Chinese goods for another 90 days to November 10, stabilising trade relations between the world’s two largest economies. The US and China have agreed to lower reciprocal tariff hikes and relax export restrictions on rare earth magnets and certain technologies.

In an unprecedented move, which some see as a ‘classic shakedown’, Nvidia and Advanced Micro Devices reached agreements with the Trump administration to obtain export licences to China by committing to pay 15 per cent of their revenue from AI chip sales to China to the US government. Nvidia, which now accounts for 8 per cent of the S&P 500 – a record surpassing the 7.6 per cent weighting Apple held in 2023 – has been lobbying Trump for months to lift the ban on exporting its H20 chip to China. In another of Trump’s “art of the deal” outcomes, Apple boss Tim Cook also agreed to invest US$600 billion in US infrastructure – while giving Trump a 24-carat gold memento – just to avoid tariffs on iPhone sales.

Elsewhere, emerging markets increased by 3.8% in AUD terms during July and have gained 13.0% year-to-date. China, Korea, and Taiwan posted strong returns despite US tariffs, whereas India detracted, falling 5.1% in USD terms as the rupee hit a record low amid trade uncertainty. China’s Shanghai Index led with a 4.1% monthly rise in July, driven by optimism over a trade truce. European stocks, measured by the STOXX 600, rose 1.6%, supported by positive trade negotiations with the US and better-than-expected economic growth data. Japan’s Nikkei 225 also increased, following a new trade agreement with the US and a slight easing of inflation.

Prices of precious metals surged amid geopolitical tensions and inflation concerns, copper prices remain up 10% for the year. Oil prices increased due to worries about Russian supply disruptions and potential US sanctions, before falling back after an OPEC+ deal to raise production. Gold has been steady but is still up 25.4% so far this year.

The International Monetary Fund’s July 2025 World Economic Outlook update forecasted global growth at 3.0% for 2025, representing a slight upward revision. However, it also warned about ongoing downside risks from potentially higher tariffs and geopolitical uncertainties.

Overall, the past month has been characterised by cautious optimism, with markets demonstrating resilience despite underlying economic worries and policy changes.

That’s the divide between men and women in Australia who feel confident about the wealth transfer plan they have in place.

Australian wealth management firm Wilsons Advisory has released an insightful report into Australia’s looming intergenerational wealth transfer and the attitudes, concerns and strategies that some high-net-worth Australians have in place.

It’s less than a decade before the first of Generation Xers (born 1965-1981) will reach preservation age (when they can access their super), a pivotal moment in Australia’s wealth transfer from Baby Boomers (1946-1964) and those born just prior to or during World War II, known as the Silent Generation (1928-1945).

The report, The Generational Blueprint – How the wealthy secure their legacy, reveals key trends in how families are planning (or not planning) for the future, including:

– Only 32% of high-net-worth Australians fully engage their families in wealth discussions

– Younger generations are more proactive about planning, but often lack support

– Fairness, tax implications, and confidence in the readiness of heirs to manage the legacy are top concerns

– Men tend to focus on investment returns, while women prioritise control, financial literacy, and long-term security, often seeking deeper educational advice.

If you’re family is tip-toeing around these tricky conversations, you’re not alone.

Your adviser at FinSec Partners can help you start the journey of your family’s succession and wealth planning needs.

Will tax hijack productivity and fundamental economic change at Chalmer’s economic summit?

Anyone with a bank account, super, a family trust, a share portfolio, or a pension, who pays tax personally or corporately, is in a union, owns a business, works in banking and finance, or has an interest in policy and regulation, is likely to be paying attention to Canberra next week.

About 25 select invitees will gather around Treasurer Jim Chalmers’ metaphorical Economic Roundtable from August 19-21 to discuss ways to improve Australia’s productivity, economic resilience, and budget sustainability, as well as tax reform.

Reserve Bank governor Michele Bullock will be the keynote speaker at the resilience session, and Productivity Commission chair Danielle Wood will open the productivity session.

Grattan Institute chief executive Aruna Sathanapally will deliver a presentation at the tax session titled “A better tax system”. Grattan contributed to drafting Labor’s 2019 election platform on tax, including its proposals to cut tax concessions for superannuation, capital gains, and negative gearing. Labor also unsuccessfully campaigned to regulate franking credits and trusts.

The economic roundtable occurs three years after Labor caught businesses off guard at the Jobs and Skills Summit by arranging a deal with unions for industrial relations reforms. Few believe the Government doesn’t already have a plan up its sleeve although the PM and Treasurer are trying to lower expectations.

While productivity was the original focus of the summit, Chalmers himself has also shifted the pre-discussion to include tax changes, saying he wants to ease the tax burden on working-age Australians and ensure the budget is more sustainable. Still, the property sector is hoping the Albanese Government will use the roundtable to support the cutting of planning red tape and review the national construction code to make construction easier, faster, and cheaper.

Fearing the summit could be hijacked by yet another unresolved debate over tax reform, a bloc of 27 business groups, led by the Business Council of Australia, has kept its pre-summit tax demands vague, proposing a quick, three-month tax review later this year involving stakeholders, Treasury, and the Productivity Commission.

In its submission, the business bloc states there is also a responsibility on the government to review its spending, which is increasing by 6 per cent annually.

“Tax reform, and the trade-offs it entails, should not be pursued or evaluated separately from government efficiency measures and spending restraint to ensure government lives within its means, as well as enacting broader productivity-enhancing reforms,” its submission says.

Treasury Secretary Jenny Wilkinson will lead a discussion at the roundtable on the role of budget sustainability. Wilkinson was, until recently, head of the Department of Finance, which is responsible for the spending side of the budget.

The Productivity Commission has recommended cutting the corporate tax rate to 20 per cent for small and medium companies but increasing the tax burden on large businesses with revenue above $1 billion.

While about 99 per cent of companies would pay less tax under the reform, roughly 500 of Australia’s largest companies, including banks, miners, and supermarkets, would not see a reduction in the current 30 per cent corporate rate.

Treasury has also increased its scrutiny of family trusts, revealing last year that around 1.7 million people received nearly $60 billion in income from these tax-efficient investment vehicles.

To deter “excessive investment” in leveraged property, some at the roundtable support, especially the NFP sector, reducing the 50 per cent capital gains tax discount to between 25 and 30 per cent, and limiting negative-gearing. There’s also support for taxing trusts more heavily to reduce tax minimisation strategies.

Our expectation is that wealth taxes, hitting family trusts and super balances, as well as more formal “death duties” are likely outcomes. We’ll look at the takeaways from the roundtable next month.

Who has been invited?

Known attendees include:

And here is the agenda:

Friday Funny