By Leon Gettler >>

WITH SIGNS of a bear market at the end of last year, there were all sorts of warnings that 2019 would be a tough year for share markets.

But investors can expect a good year ahead in the markets, if they can deal with the volatility, says AMP chief economist Shane Oliver

Dr Oliver told Talking Business that there were some issues, like the uncertainty about trade and Donald Trump, still to be resolved.

“But I think this will be a better year for the simple reason that we don’t see a global recession, we don’t see a US recession any time soon,” Dr Oliver said. 

“Yes we have seen a slowdown in growth but we saw slowdowns in growth in 2015, 2016 and 2011 but they weren’t associated with global recession at the time.

“Consequently, if investors come to the view ‘We’re not going to have a recession after all, maybe it’s a few years down the track but we’re not there yet’.  Then share markets are pretty cheap, even at these levels,” Dr Oliver said.

“We still have an environment of pretty easy monetary global conditions globally.

“I think this will set up for a better year.”    

He said however that volatility would continue.

He said there was little volatility in 2017 but usually years of low volatility are followed by periods where it is high.

Dr Oliver said earnings growth this year would be more moderate compared with last year, which was helped by Donald Trump’s tax cuts which added 5-10 percent of earnings growth. 

He said earnings growth would slow from around 20 percent to about 5 percent. Still, the share market could rally in that sort of environment.

Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at



MORE self-funded retirees are becoming aware of the implications of Labor’s proposal to remove the ability for individuals and superannuation funds to claim their full entitlement to franking credits and the Institute of Public Accountants (IPA) is questioning the unfairness of the proposed policy.

“The refunding of imputation credit policy has been in operation for close to two decades and removing it in a piecemeal way without dealing with the consequences is fraught with danger,” IPA chief executive officer, Andrew Conway said.

“Piecemeal change fails the fairness and equity test that policy makers generally strive for. 

“Any policy change that has inconsistent outcomes -- industry funds versus SMSFs, pension guarantee rule -- will struggle to meet the fairness test.  In addition, retirees with large balances in excess of $1.6 million in superannuation are also less impacted than those with lower balances," Mr Conway said.

“More importantly we need to be looking at how we tax all forms of savings more consistently. A more holistic approach to taxing personal savings across all asset classes, as recommended by the Henry Review, would be more beneficial than changing one aspect in isolation.

“We do not support any changes in the removal of refundable franking credits unless it is associated with more holistic tax changes to the treatment of savings more broadly.  A survey of our members also shows that 95 percent of respondents do not support any change.

“The inquiry has put the spotlight on the policy proposal," Mr Conway said. "The IPA was represented at the inquiry, putting forward our members’ views, along with our submission."


By Leon Gettler >>

GLOBAL GROWTH is expected to slow down in 2019 with the data flow from China, the US, the Eurozone and Australia, according to economist Stephen Koukoulas.

Mr Koukoulas told Talking Business that while there was no sign at this stage of a recession or hard landing, growth will be slower in 2019.

“We have got the global economy easing back a notch and the big question for economists and markets is, how slow will it get?” Mr Koukoulas said.

He said the picture in Australia was complicated with the slowdown in the housing market and the tightening of credit, leaving businesses struggling to raise money. 

He said Prime Minister Scott Morrison’s election pledge to create 1.25 million jobs over the next five years was problematic.

He said the government’s budget forecasts in December had gross domestic product growing at 3.5 percent and employment growth at 1.5 percent.

“Even with those good numbers, you only have 950,000 jobs. Maybe has something up his sleeve in terms of pump priming for the economy, but it doesn’t look likely. He won’t achieve that.”

Mr Koukoulas said the Reserve Bank of Australia would have to do an about face and cut interest rates with inflation low and the economy weaker than expected.

He said gradual deceleration in China will affect the global economy, and Australia’s.

He said China was growing at the slowest rate in 28 years and China was now easing its monetary policy because of concerns it was slowing down a lot harder than first forecast.

“The thing that’s still lingering over the global economy is the Trump tariff wars,” he said.

Another issue was the political turmoil, of the shutdown in the US, Brexit, demonstrations in Paris and France and the election in Australia. All this has an impact on investors.

 “It doesn’t stop businesses from investing and consumers from spending but it has this marginal impact,” Mr Koukoulas said. 

“When you talk about an economy going at 2.5 or 3 percent, it doesn’t sound like much but it’s actually quite important for its implications for employment, for inflation. The softening of the economy becomes a little more acute.”


Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at

SCOTTISH Pacific has welcomed ASBFEO’s Affordable Capital for SME Growth inquiry recommendations as a boost to flexibility for funding

Ombudsman Kate Carnell has released eight recommendations to increase the supply of capital and raise SME business owners’ awareness of alternative sources of finance outside traditional banking.

Scottish Pacific’s chief customer officer Ben Cutler highlighted ASBFEO’s plans to develop a financial products guide so that business owners know what funding options are available and best suited to them. 

“As the ASBFEO report indicates, and our own SME Growth Index research and 30 years’ experience of working with business owners shows, SMEs can become ‘rusted on’ to their banks. This means they might not be looking for, or be aware of, other credible funding options,” Mr Cutler said.

“ASBFEO’s report quotes ABS statistics that only 15 percent of all businesses apply for debt or equity finance, and 90 percent are approved – with the vast majority of SMEs not even applying for funding. They highlighted that banks say only one in 100 business owners over 30 years of age would consider changing banks.

“This finding is backed up by our SME Growth Index research, which shows that fewer than 5 percent of business owners actively keep an eye out for credit facilities that fit best with their business. Fifty percent don’t ever get around to reviewing their primary bank relationship and only 20 percent review this regularly,” he said.

Scottish Pacific consulted with ASBFEO for their Affordable Capital for SME Growth inquiry.

ASBFEO’s report claims business owners would benefit from a clear understanding of the different forms of capital, and that SMEs and their advisers need to determine how much capital they require and also what type of product best fits their needs.

The report referenced the current poor level of awareness by business owners about funding options, citing figures from a recent RBA roundtable: the total Australian market for debtor finance is about 4500 but nearly 65,000 SMEs could be utilising these products.

“Scottish Pacific has a 30-year history of funding thousands of business owners’ growth aspirations, with a style of funding that doesn’t put the family home at risk,” Mr Cutler said.

“So, it is frustrating to think that 65,000 businesses – more than 95 percent of the eligible market – could benefit from this style of finance, yet many are not aware of the option. Along with government and industry bodies, we’re trying to change this situation.

“It’s great for business owners to have wide funding choices and any effort the Ombudsman makes to put more options in front of SMEs, such as an SME Guide to Financial Products, is very welcome.”

The Ombudsman’s recommendations outline initiatives to increase the supply of capital and inform and prepare SMEs to seek capital, with a better understanding of all the funding options available.

“Recommendation Six is for business owners to work with their trusted advisers to get their enterprises finance-ready,” Mr Cutler said. “We work closely with key introducers, brokers and accountants, and we see there is a vital role for them to play in helping business owners source funding, and be funding-ready.”

The Affordable Capital for SME Growth report points out that the banks’ risk-weighted appetite, focused on real estate, limits the lending available to Australia’s SMEs.

It states that home ownership in the key entrepreneurial period of life (ages 25-34), is down by over 30 percent over the past 25 years, and with some forecasters expect housing markets to decline this could have a major impact on business owners’ ability to access funds.

“Ever since the Global Financial Crisis, banks have required enhanced levels of real estate security for SME loans,” Mr Cutler said.

“This has driven business owners’ interest in alternatives to the banks, including debtor (invoice) finance, fintech solutions and crowd-sourcing.

“Scottish Pacific is the independent market leader in providing funding options that don’t put SME owners’ family home on the line, instead it secures funding linked to the business’ accounts receivable so that the funding line grows in line with the business.”

Mr Cutler suggested business owners and their trusted advisers should talk to the different alternative lenders, as well as the banks, to find the right style of funding for their business.

“When you are talking to lenders, get a feel for who is here to stay with you in good times and in bad and who is able to make things work for your clients. It really pays to broaden your working capital horizons.”

The Affordable Capital for SME Growth Report, based on ASBFEO’s inquiry to address the funding gap for small to medium sized enterprises, is available on ASBFEO’s website.



CHINESE investment in Australia’s healthcare sector has surged over the past three years – not featuring at all before 2015 – to reach a total of A$5.5 billion across 16 completed deals, according to a new report from KPMG and The University of Sydney Business School.

The report, Demystifying Chinese Investment in Australian Healthcare, which covers investments into Australia made by entities from the People’s Republic of China through mergers and acquisitions (M&A) and joint ventures in calendar years 2015 to 2017, found that investment has been concentrated in the health supplement and medical treatment sectors in Australia. 

A KPMG spokesperson said to date there had been no significant investment in pharmaceuticals, biotechnology or aged care.

According to the report, $2.55 billion was invested in 2015, $1.35 billion in 2016 and $1.58 billion in 2017 through several very large deals, including the $930 million acquisition of hospital operator Healthe Care in 2015 and the acquisition of Swisse Wellness for more than $1.5 billion across 2015 and 2016.

Major deals in 2017 included the $800 million investment in Ansell’s Sex Wellness Division by Humanwell Healthcare and CITIC capital, and the $337million investment in PRP Diagnostic Imaging by Hengkang Medical Group.

On recent trends, Chinese investment groups in Australia’s health sector are predominantly privately owned. About 80 percent of deals, by value, involved private rather than state-owned Chinese companies – although there is known to be a large crossover between commercial and official governance in Chinese firms. Many investors have health sector experience at home and they have shown a willingness to make repeat investments.

Advantageous international trade agreements combined with progressive domestic initiatives such as the Federal Government’s Medical Research and Innovation Strategy and the National Innovation and Science Agenda are improving Australia’s comparative advantage in advanced health sector industries and helping drive further investment attraction.

Australia is doing well relative to many other countries. By comparison, Chinese investment into US health, pharma and biotech for the three year period reached US$4.7 billion (A$ 5.7 billion).

According to report co-author, Doug Ferguson, who is the head of Asia and international markets at KPMG Australia: Australia’s success in attracting investment is due to Chinese companies seeking the “complete Australia package”.

“Chinese investors have really shifted their investment interests to Australia’s hi-tech, high quality health products and services sector in the last three years,” Mr Ferguson said.

“Australia presents a range of country-specific advantages that include advanced technology application, quality care facilities, strong management systems and the ‘clean, green and healthy’ image for Aussie branded exports back to China.

“As China’s aged care industry develops and its medical treatment sector matures there will be a greater need for these qualities and more demand for the businesses providing them. There’s still a long way to go,” he said.

Beijing-based Jenny Yao, who is KPMG China’s head of healthcare, explained in the report that the central government’s Healthy China 2030 plan provided a very clear framework for the country’s health sector development priorities. China’s healthcare spending is expected to grow by 8.1 percent annually over the next five years, representing a big opportunity for Australia’s health sector.

“The patterns that are emerging in China’s domestic healthcare sector are likely to strengthen investment demand in the coming years as healthcare assets become a key component of many Chinese investor’s portfolios,” Ms Yao said.


Professor of Chinese business and management at the University of Sydney Business School said the economic and social conditions in China explained the latest investments.

“Changing conditions in China such as rising income, wide-ranging reforms to public healthcare and new consumer preferences for the ageing all suit Australian exporters,” Prof. Hans Hendrischke said. “Foreign investment is important to build global partnerships with knowledge of foreign markets and access to international distribution networks.

“Rather than general health services, many Chinese companies seek to invest in specialist services, such as oncology, radiology, ophthalmology, IVF, and aged care. These services are replicable in the Chinese market and customised to fit the specific needs of China’s middle-to-high end consumer markets.

“Australian healthcare brands have an initial advantage in China due to their reputation for high quality products with consumers,” he said.

The report predicts that investment will broaden across all sectors in the short-to-medium term. The patterns that have emerged in Chinese healthcare investment so far will likely strengthen in the coming years as healthcare assets become a key component of many Chinese investors’ portfolios.

The introduction of Chinese policies to establish a public/private healthcare system built on ‘big health’ presents an opportunity for Australian companies to share their expertise and participate profitably in the industry’s transition and growth.

“For Australian companies, Chinese investment presents an opportunity to access capital and new markets with new supply chains with established local partners,” KPMG’s Doug Ferguson said.

“ The outcome of increased investment will be a highly competitive Australian healthcare sector that can accelerate exports as well as continue private sector investment in research and improve technological capabilities.”


       From 2015 to 2017, Chinese investment in Australia’s healthcare sector totalled $5.5 billion, across 16 major deals.

       53 percent of the investment was concentrated on Australia’s health supplement sector, 47 percent in the healthcare services sector – with no major investment as yet in pharmaceuticals, biotechnology or aged care sectors.

       New South Wales attracted 49 percent of Chinese healthcare investment between 2015 and 2017, followed by Victoria with 45 percent and Queensland with 6 percent.

       80 percent of completed deals (by value) were by Chinese private companies from diverse backgrounds, including hospitals, specialised healthcare providers, pharmaceutical companies, construction companies and private equity.

       Chinese investors are attracted to target companies that are exporting or capable of exporting to the Chinese market.

       China’s healthcare spending is expected to grow by 8.1 percent annually over the next five years.


       Mature business services and technology.

       Australia is ranked first among English-speaking countries as a destination, ahead of Canada, the UK and the US.

       The small time difference with China (2-3 hours).

       Stable political environment and low sovereign risks.

       Transparent regulatory environment.

       Long term stable economic return.

       Cultural diversity.


RESEARCH by Adviser Ratings has found financial advisers are highly dissatisfied with major incumbent technology vendors – although they rate Netwealth, AdviserNETgain and Lonsec highly.

“Technology and investment research providers to financial advisers are on notice to better serve their clients.” Adviser Ratings, managing director Angus Woods said. “Our survey clearly shows a high level of dissatisfaction with many technology players, at a time when advisers are facing other cost pressures, particularly in the areas of education and compliance. 

“Advisers are looking for more technological and phone support from platforms and planning software to free up their time and provide compliant end-to-end solutions to achieve this. In addition, with increased adviser mobility between licensees and the growth in social media, advisers are becoming more influenced by their peers’ opinion when selecting a new platform or software solution.”

It was no wonder major incumbent providers that previously drove the market for financial advisers – particularly the ‘Big Six’ of AMP, IOOF and the banks – were very much on the outer in this survey.

Netwealth was the favoured administration platform for investment functionality, with Hub24, CFS FirstChoice, CFS FirstWrap and Macquarie Wrap rounding out the top five of 17. 

Netwealth was also the favoured platform for insurance functionality, with Hub24, Praemium, BT Panorama and BT Wrap rounding out the top five of 15.

AdviserNETgain was found to have the most satisfied advisers in the financial planning software space, although it was on limited licensee coverage.

Lonsec edged out Morningstar for the most satisfied advisers in the research space, according to Adviser Ratings.

There was an extraordinary movement of advisers between licensees in the last three years, especially out of the institutional space, with a 43 percent increase in the number of small licensees.

“The challenge is understanding where advisers are going and servicing a greater volume of advice firms,” Mr Woods said. “It is not just about building a better technology solution but strengthening relationships with key decision makers in these practices who are increasingly looking for ‘plug-and-play’ software choices.

 “AMP and the banks could often afford to have technology support staff on the ground, resulting in a ‘sticky’ adviser for the incumbent technology providers. There are now over 8000 practices in Australia with less than five advisers, so it is just not feasible to have this support model in place” Mr Woods said. 

In assessing satisfaction levels of advisers, Adviser Ratings used a widely-known customer experience metric, the Net Promoter Score (NPS). NPS measures the loyalty of a user to a particular provider’s product or service.

Other qualitative questions were overlaid, including fees, provider support, adviser reporting, platform functionality, robustness of research and ease of use to help understand the reasoning behind these scores.

“With most providers where functionality or features were fairly even, we found the level of service and knowledge and helpfulness of its staff, was the most important feature when coming up with their score,” Mr Woods said. “We then split these responses by licensee and geographic area to determine which type of advisers are better serviced.”

With Adviser Ratings forecasting a significant acceleration of adviser movements and a continued shift into self-licensing, it opens the door to new players.

“With satisfaction and loyalty rates at such low levels and with advisers moving to practices where technology providers don’t have a strong influencing relationship, incoming players like Intelliflo and Advice Intelligence will present a real challenge to the market leaders, IRESS and Temenos,” Mr Woods said.

“We are seeing this in the $800 billion platform space with the emergence of Netwealth and Hub 24. Swiss-based Avaloq recently announced its intention to tackle this area. Frustrated advisers will soon have more choice. It is up to the incumbents to see if they are ready for the challenge.”

The Financial Advice Landscape report is said to be the most comprehensive snapshot of the financial advice industry and provides a unique view of the advice ecosystem in 59 regions across Australia. The report incorporates Adviser Ratings’ proprietary data, census data, and results from an online survey conducted in Nov-Dec 2017 responded to by 1,103 financial advisers.


THE Institute of Public Accountants’ (IPA) pre-Budget 2018-19 submission in January recommended that the Federal Government introduce a publicly-supported venture capital (VC) fund to enhance the entrepreneurial environment in Australia.

“The VC fund could be established by either providing a significant proportion of funds to assist VC managers to attract other institutional investors to publicly-supported VC funds or by becoming an institutional investor in a range of individual VC funds,” IPA chief executive officer, Andrew Conway said.

“This level of support by government to small business equity finance will improve the entrepreneurial environment in Australia and act as a catalyst in identifying and overcoming hurdles to successful and profitable investment. 

“Many young firms face funding problems, particularly in uncertain technological or new knowledge environments because of their unattractiveness to bank lenders.

“It is a lost opportunity to the Australian economy when innovative firms with high commercial potential are constrained by the absence of external finance,” Mr Conway said.

“Any government with a strong commitment to economic growth via research and development and investment which facilitates greater enterprise and innovation activity must ensure that early-stage venture capital finance remains available to high potential, young firms.

“Otherwise, we risk a reduction in new commercialisation opportunities stemming from national investments in science and technology,” Mr Conway said.


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