Appearing in In The Black magazine, March 2018

url: https://www.intheblack.com/articles/2018/03/15/small-business-owners-asia-pacific-optimistic-survey

Small business owners in the Asia-Pacific feeling optimistic: survey

 

Small businesses in the Asia-Pacific region are successfully leaping into the digital era and are optimistic about the future, according to CPA Australia’s 2017 small business survey.

Across the region, small businesses with a focus on technology, innovation and exporting are significantly more likely to be growing and creating jobs than those that are not.

The Asia-Pacific Small Business Survey, the eighth conducted by CPA Australia, was of 2952 businesses with fewer than 20 employees from Australia, New Zealand, Mainland China, Hong Kong, Indonesia, Malaysia, Singapore and Vietnam. While Hong Kong is a Special Administrative Region of the People’s Republic of China, for the purpose of the survey data for Hong Kong is shown separately from Mainland China.

Growing sense of optimism among small business owners

The survey found a growing sense of optimism in the small business sector. Overall, 2017 was slightly more positive than 2016, with a moderate increase in the number of businesses reporting that they grew.

Indonesia and Vietnam showed the strongest rates of growth, and Australia, New Zealand and Singapore the weakest.

Small business confidence in their expected performance in 2018 is highest in Indonesia, Vietnam and Mainland China and lowest in Australia, Singapore and Hong Kong.

Confidence in their local economy is highest in Vietnam and Indonesia and lowest in New Zealand and Australia.

Respondents under 40 were significantly more likely to state that their business is growing, and are more confident about general economic conditions.

The Asian average of businesses planning to increase employee numbers over the next year – a metric associated with growing businesses – is 49.4 per cent. This contrasts with a figure of 18.8 for Australian small businesses and 17.6 per cent for New Zealand small businesses.

“2017 was a positive year for most small businesses across the region, especially in Indonesia and Vietnam, and these positive conditions look set to continue into 2018,” says Paul Drum FCPA, CPA Australia head of policy.

Small businesses and digital payments

The survey found that over 90 per cent of small businesses in Asia use social media or sell online, especially in Mainland China, Indonesia and Vietnam, while counterparts in Australia and New Zealand are lagging.

Amongst Australian and New Zealand small businesses, only about 60 per cent use these technologies.

The link between growth and technology is reflected in over 78 per cent of businesses that grew strongly in 2017 reporting that their investment in technology was already profitable. The emphasis on technology extends to payment systems, with Mainland China at the forefront. Nearly two-thirds of small businesses from Mainland China offer at least one e-payment option (from digital platforms such as AliPay, ApplePay, and WeChat Pay).

Over a third of these companies said that payments via digital platforms made up over 30 per cent of total sales.

Small business shy of bitcoin

There appears to be a wariness of cryptocurrencies such as bitcoin.

In Vietnam, however, 32.9 per cent of respondents said they accepted cryptocurrencies, although cash remains the most popular payment option for the country’s small business owners.

Cryptocurrencies are also gaining ground in Indonesia, where 24 per cent of small businesses accept it as a payment method.

However, in the other markets surveyed only a small percentage of businesses accept payment via such means.

Drum says that while there is a strong link between adoption of technologies and growth, “this does not always mean that investing in the latest thing is always a good thing – and bitcoins and other cryptocurrencies are a very good example of where businesses need to tread carefully.”

Exports and innovation are key to small business growth

Small businesses that have exports and innovation as a key part of their business model are significantly more likely to have grown in 2017 and to expect to grow in 2018. Amongst Asian business, 24.5 per cent expect revenue from overseas sales to grow in 2018, compared to only 6.7 per cent in Australia and 8.2 per cent in New Zealand.

“The survey results again show a strong link between innovation and growth – yet innovation is not all about white lab coats and Silicon Valley-types,” says Drum.

“Innovation can include introducing a new product or service to your market or investing in new processes – and this may come not just from a new invention but market research in overseas markets or tweaks to your existing product range.”

While technology is improving processes, small businesses in Asia were significantly more likely to introduce a totally new product, process or service to their market or the world than Australian and New Zealand small businesses.

This was especially true with businesses from Indonesia and Vietnam.

Of Australian companies, only 7.4 per cent expected to bring something new to the market (9.2 per cent for New Zealand), compared to an Asian average of 29.1 per cent.

Costs and finance hurt small business

Survey respondents cited customer loyalty, good staff and improved customer satisfaction as having the most positive impact on their business in 2017.

Increased costs and increasing competition were seen as the factors most detrimental to their business. Staff costs were a particularly significant cost in Mainland China, and rent costs were again named as a problem in Hong Kong.

Small businesses in Australia and New Zealand are much less likely to have required external finance in 2017 than businesses from Asia.

In Asia, as well as Australia and New Zealand, banks are the most common source of finance, and in most cases businesses borrowed to finance growth.

In Singapore and Hong Kong, however, there were large numbers of businesses that accessed finance to cover increasing costs. This is a worrying trend, pointing to high cost structures and potentially high levels of debt.

Reflecting the above-average use of social media tools, online sales and new payment technologies, respondents in Mainland China reported a growing use of fintech to finance their business. Over a quarter of these respondents who raised funds in 2017 said that their main source of finance in 2017 was peer-to-peer lending and crowd-sourced funding. The implications of this are not yet clear but it indicates that fintech is a growing field.

Growing cybersecurity threat to small business

Cybersecurity is a significant concern for small businesses across the region.

The survey average saying that an attack was very likely or somewhat likely in 2018 was 35 per cent, with Australia and New Zealand at the lower end (26 per cent and 19 per cent respectively) and Vietnam and Indonesia at the higher end (81 per cent and 76 per cent respectively).

Businesses that expect to grow in 2018 are the most likely to expect a cyberattack, with over 69 per cent expecting it.

Even where businesses do not believe they will be subject to a cyberattack in 2018, the majority are still taking action to protect their systems. The most common cybersecurity actions are regular anti-virus, anti-spyware and malware scans, performing regular backups and storing the backup offsite or in the cloud, and using a spam filter on email accounts.

Actions such as insurance covering cyber risks, engaging a cybersecurity specialist, or having a “whitelist” application to block unapproved software appear to be fairly uncommon. Taking actions in these areas could do much to limit damage from a cyberattack, or even prevent it from occurring.

Related article: 8 cybersecurity strategies to protect you and your business

Drum says the outlook for 2018 is generally positive across the region, particularly for businesses from Indonesia and Vietnam, and those that make good use of technology, that are expecting to innovate and grow their revenue from exports.

“Businesses should be considering how to build their understanding of technologies so that they can invest in technologies that best meet their needs, and take time to learn about new markets. While such research may not result in an exporting opportunity, it may give businesses new ideas they can roll out,” he says.

The data

In total, 2952 participants completed the online survey, conducted from 13 October to 10 November 2017.

Survey participants, by country

Australia 511

Mainland China 606 (Beijing, Chongqing, Guangzhou, Shanghai)

Hong Kong 310

Indonesia 304

Malaysia 309

New Zealand 306

Singapore 305

Vietnam 301

 

Appearing in In The Black magazine, June2018

https://www.intheblack.com/articles/2018/06/01/australian-big-appetite-consumer-debt

Australia’s big appetite for consumer debt

 

Whether they know it or not, many households are becoming financially stretched, but with a taste for the high life – and historically low interest rates – there seems to be little Australia’s savings rate is low, and getting lower. incentive to save.

If Australians are learning anything from the 2018 Royal Banking Commission, it’s that we have a big appetite for debt – and financial institutions have been happy to indulge us – with mortgages, loans, credit cards and overdrafts sometimes far beyond our means to repay. While the Australian economy continues to experience modest growth, saving levels continue to fall, and personal debt is increasing.

Indeed, many households are only one crisis away from financial hardship.

“This is a multi-faceted problem,” says Paul Drum FCPA, head of policy at CPA Australia. “We are seeing wage stagnation in many sectors, disincentives to save, and very high property prices. It’s a dangerous mix.”

According to the ABS System of National Accounts, the household saving ratio stood at 4.6 per cent in 2016-2017. The ratio represents the percentage of net savings on net income, and this was its lowest point in nine years. It continues the downward trend of the past five years, and it’s the longest run since 13 consecutive quarters of no increase in savings recorded between 1985 and 1988.

Providing an incentive

Drum notes that, at present, government policy provides no incentive to put money aside. He acknowledges that most Australians have superannuation accounts of some type, but he believes many people do not see them as a form of saving.

“It’s good to have super as a form of retirement savings, and its tax-preferred status has been effective for that,” he says. “But it does little to recognise the necessity for individuals to save income outside of super to cope with sudden problems or make capital purchases without going into debt.

“In fact, taxing income from savings accounts at the same level as the individual’s marginal personal tax rate adds up to a relative disincentive. Providing a tax discount would encourage greater savings and investment outside of super. Coupled with other moves, it might also encourage investment in assets other than only the family home.”

The 2010 Henry Tax Review into Australia’s taxation system proposed that there should be a 40 per cent savings income discount available to individuals for non-business related net interest income, net residential rental income (including related interest expenses), capital gains (and losses), and interest expenses related to listed shares held by individuals as non-business investments.

CPA Australia underlined its support for this proposal in its submission to the Commonwealth Government on the 2018 Federal Budget.

Increasing the total level of savings would provide a greater pool of funds for investment and would add a welcome element of financial diversification for many Australians, CPA Australia noted.

“Many people, especially younger generations, have become used to not saving much, if anything, from their disposable income, and comfortable with levels of debt that once would have been unthinkable,” Drum says.

“It may be because younger people have only ever really known a low-interest rate environment. They often have a high-consumption lifestyle, without realising that they are very financially stretched. Having a buffer would be a good strategy against the day when there is a personal setback or a general economic shift, such as a significant rise in mortgage interest rates. A tax discount means that a savings buffer would make financial sense as well.

“At the very least, we would like to see the proposal of a tax discount examined in more detail by the government. Some modelling by Treasury would be very helpful to see how it would affect the savings rate, and might suggest other policy moves to improve the picture.”

Rising indebtedness

The other side of the low savings rate is the increasing level of household indebtedness. According to the ABS Household Income and Wealth Survey, which asked 18,000 Australians about their household income and debt levels in the 2015-2016 financial year, about 29 per cent – or 1.9 million households – were classified as over-indebted in terms of their debt-to- income ratio. This means they had debt three or more times their annual disposable income. In 2003-2004, it was 8 per cent lower, at 21 per cent.

“There was a slight uptick in the household saving ratio at the end of 2017,” says Bruce Hockman, chief economist at the ABS, “but it appears to relate to employment growth, so aggregate income has been a bit higher. Household consumption figures are high and continue to grow, indicating that people prefer to spend rather than save. We are not in a period of ‘dis-saving’, as has occasionally happened before, when people have to dip into whatever savings they have to meet day-to-day expenses, but many people are living at the edge of their means.”

Households with a mortgage were the most likely to be over-indebted. There is an age co-relation, too: with property debt, younger households (aged 25 to 34) had higher rates of over-indebtedness, with 62 per cent over-indebted and owing about A$440,000. Among people aged 35 to 44, 51 per cent were over-indebted and owed about A$546,800. Even though interest rates are low, the level of property-related indebtedness has been driven by extremely high house prices.

Melbourne had the highest number of over-indebted households, 419,600; followed by Sydney, with 407,000, although the level of over-indebtedness is greater in Sydney.

Over three-quarters of over-indebted households lacked sufficient “liquid” assets to cover a quarter of the value of their debts. This is a major red flag, as it means that these households are at risk of defaulting on their loans if there is a reduction in their income, or they are required to repay more.

Significantly, it is better-off Australians – the upper 20 per cent on the wealth scale – who are the most indebted.

“About 47 per cent of the more wealthy households that have a property debt are over-indebted,” Hockman says. “In some cases it is because they have one or more investment properties, in others, they have bought a very expensive house. There is often an implicit assumption that interest rates will stay low. That’s a worrying assumption. People with this level of debt are susceptible to real problems if market conditions change, or if there is a change in household economic circumstances.”

Over-indebted high-income and high-wealth households (with property debt) owed an average of A$912,700 and A$924,400 respectively, in property debt. High-income households paid a total of A$754 per week towards their property debt, about A$110 more than high-wealth households. According to ABS calculations, if interest rates were to increase by just one percentage point, these households would have to find an additional A$170 per week to keep up with repayments.

Looking at the broader community, the average amount of household debt was A$168,600 in 2015-2016. This, after adjusting for inflation, is almost double the figure of A$94,100 for 2003-2004. Three-quarters of Australian households have debts, with the most common form being credit cards, held by 55 per cent of the population. Student loans are held by 17 per cent of the population.

“Continually financing a lifestyle on debt, and on the expectation of rising asset prices, is a recipe for trouble,” Drum says. “Many people should sit down with a finance professional and take a close look at their position, and make sure they can weather any storms that come.”

 

Drowning in debt

“For many people who seek our help, there has been an event that has upset their usual financial arrangements,” says Janet Inglis, a financial counsellor with the National Debt Helpline. “It might be a sudden illness or the loss of a job, and suddenly money becomes a real issue.”

The National Debt Helpline is a not-for-profit service that helps people tackle their debt problems, which includes ensuring they know their rights, identifying ways to increase income, prioritising debts, and providing emotional support.

“Our clients come from across the spectrum,” Inglis says. “An increasing number are casual workers whose working hours have suddenly been reduced. Underemployment and job insecurity are often linked to indebtedness. Trouble with repayments on car loans is another common reason for people to seek our help.

“When people have exhausted their savings, the stress and anxiety compound. It is a real blow when letters of demand begin to arrive and debt collectors start to knock on the door. A good part of our work is to ensure that people are aware of their rights, including hardship provisions. We provide guidance on how to negotiate payment terms.’’

For people with few options to tackle their debts, financial counsellors explain what comes next and what creditors can do to recover their money, including taking legal action. This usually leads to the difficult conversation of selling assets.

“It is always better that people take control in such situations and to not wait for the creditor to act,” Inglis says.

“The key is to plan for the unexpected. Acknowledge that bad things can come out of the blue. Work out how much of a buffer you might need to ride out tough times, then do what you can to build a reserve to that level. Be realistic about your income, your lifestyle, and expectations. If you have something in reserve and never need it, well and good. But knowing it is there can provide peace of mind.” For further information, visit National Debt Helpline or call 1800 007 007 to speak to a financial counsellor.

Saving or spending?

According to World Bank data, in 2015 Australia recorded a figure of 23.5 per cent for gross savings as a percentage of gross national income. This was behind Singapore, at a relatively healthy 48.4 per cent, mainland China (48.3 per cent), Thailand (33.8 per cent), Malaysia (28.8 per cent), Indonesia (33.2 per cent), India (32.7 per cent), and it’s also below the world average of 26.4 per cent.

 

Appearing on In The Black Digital, June 2018

url: https://www.intheblack.com/articles/2018/06/08/considering-career-change

 

Considering a career change? Plan carefully.

 

The days of having a step-by-step career in one organisation are past, and new models of work are emerging. Changes once seen as radical are no longer seen as unusual, but to make them work takes planning, awareness and self-organisation. Michelle Gibbings outlines how to make a career leap.

“Many people make a major career change because they realise they are no longer being challenged,” says career consultant Michelle Gibbings, author of the book Career Leap*.

There might have been a change in their life situation that makes them think about what to do next, or they might be on the brink of burnout, feeling the physical signs of stress, says Gibbings.

Of course, there are cases where it is not a choice but pushed onto them by redundancy, she adds. “That can be traumatic in the short term but in my experience it often turns out to be a blessing, opening up opportunities for personal and professional reinvention that might not otherwise have been considered.”

For people in the finance sector, the most common transition is a shift from a corporate environment to a consulting practice or small business. If the move seems radical, however, there is usually some point of commonality of skills, which might be management, financial advice, or strategic knowledge.

“I had one client who moved from a corporate role to start a florist business,” says Gibbings. “The point of commonality was her business knowledge, as she was managing the business, not arranging flowers. She was very happy with the change.”

How to start your career change

An essential first step in making a career leap is to work out where you want to go, which entails deciding what you like to do.

Surprisingly, many people do not actually know what they like to do. This is particularly true in the finance sector, where it can be difficult to find the time for self-reflection and consideration.

“Look at it as an audit,” says Gibbings. “An examination of your work, your life, and the balance you want to have. It can be a hard thing to do on your own.”

She suggests talking to as many people as you can, including those different from yourself in outlook and experience.

“People often find that they can do more than they first think they can,” she says.

Warren Coxall, associate partner at recruitment, search and advisory firm FutureYou, agrees.

“Making a career transition may mean making sacrifices in the short term,” he says. “This may be taking on a more junior role, completing additional study, or taking an initial pay cut. But anyone can make a career change at any stage.”

Coxall is in a good position to know. He has made a number of career changes, including from the entertainment industry into recruitment and search, and now into a talent advisory role.

Research your career change

Both Gibbings and Coxall emphasise that a career leap should not be a leap in the dark. Once the direction is chosen there should be a period of research to identify what will be needed.

It might be necessary to develop new skills, especially if you are going out on your own. Adjusting to the lack of support provided by a corporate environment can be a problem, especially when it comes to learning new technology and processes without experts to call upon.

Another issue in moving out of a large company is the change in social dynamics. Working for yourself can be isolating for people used to having others around them, so it can be important to have a supporting network of friends and family.

“No career can be considered in isolation. The best career path is one that aligns with your personal purpose and values,” Coxall says. “Consider how your new career path will impact your relationships, finances and daily life.

“It’s important to ask yourself the tough questions and be honest with your answers. Are you willing to relocate for a new career opportunity? Are you willing to sacrifice financial reward for professional growth?”

Many people will want to give you advice and Coxall says you should be judicious in how you evaluate this. “It is ultimately your decision so don’t be swayed, and seek out others who will help you along the journey.”

Don’t rush into a career change

Coxall also advises that the decision to make a career leap should not be rushed.

He took over a year to decide how and to where he should make his own career leap into the talent space, and has never looked back.

Likewise, Gibbings notes that adjusting to a new pattern of work can be difficult. “Don’t assume that what worked for you in your old career will work in the new environment,” she says.

Be prepared to throw out the old rulebook. “If you take your leap for granted and are not strategic about how you position yourself, build connections or focus your effort, then unfortunately you’ll most likely land face first.”

Five tips for making a successful career leap

• Understand why you want to leave where you are
• Take some time to decide where you want to go
• Conduct a careful audit of your skills
• Determine what you will need in your new role
• Understand how your change will affect your personal life and the lives of those around you

 

* Career Leap: How to Reinvent and Liberate Your Career by Michelle Gibbings, Wiley, ISBN 9780730352198.

 

 

 

Appearing in In The Black Digital, url https://www.intheblack.com/articles/2018/04/17/beat-addiction-to-distractions

 

Beat your addiction to distractions at work

 

Everyone knows the problem: you finish the day exhausted but when you look back you have not actually achieved what you wanted. Instead, you have answered emails, responded to phone calls and texts, and solved other people’s problems. But you have not done the strategic thinking your job entails, and staying behind to work extra hours after everyone else has left is not a good solution.

“Distractions at work are a real issue,” says Alison Hill, a psychologist and CEO of Pragmatic Thinking, a behaviour and motivation strategy company. “Often, it is not even recognised. It is easy to confuse busy-ness with productivity. Dashing around the office and jumping from conversation to conversation can look busy, but the real question is whether they are being effective at their job. Yes, some people love the buzz of constant activity. But there are plenty of cases where company success comes from careful analysis and considered decisions, and that can require peace and quiet.”

 

In some cases, the physical design of the office can be a problem. Open-plan design is good for communication and transparency but it can easily destroy concentration. An idea that some companies are experimenting with, according to Hill, are different ‘zones’ set aside for different types of work.

She also recommends new thinking about meetings and discussions with colleagues. She believes that ‘stand-up’ meetings can be effective, if the subject can be dealt with quickly.

“Another option is the walk-and-talk discussion, if you are just dealing with one or two other people,” she says. “Get out of the office, walk around the park. It will clear your head and help you all to focus. But – and this is important – leave your phone on the desk. You can live without it for a while.”

Digital distractions

Amantha Imber, CEO of innovation consulting firm Inventium, identifies technology as a chronic source of distraction. The flood of emails is a huge problem. Because it is easy to copy someone into a message, even if it is only marginally connected to their job, there is a tendency for everyone to do so.

 

“Managers should encourage people across the company to think twice before hitting the cc tab,” she says. “Whether it is a formal policy or just presented as a good thing to do, it can really make a difference. Think about it: the time spent responding and the number of people involved – it adds up in an organisation.”

 

For people wanting to avoid digital distractions, one solution is to not respond to emails as they come in. Instead, set aside particular blocks of time, such as when you arrive at the office, before lunch, and before you leave at night, to respond.

Coupled with this is another strategy: turn off the ‘notifications’ signal. Even if you are not going to answer immediately, the knowledge that there is an email there can itself be a distraction. The same can be applied to phone calls and texts.

“I think that many people don’t know that there is a way to turn off the notifications beeper,” says Imber. “Well, there is. That one push of a button can have a critical impact on productivity.”

But if you are going to remove yourself from the hubbub to focus on a task it is important to inform your colleagues. That way, they can understand and adjust their expectations about receiving an immediate response.

Dedicating time and space

For people who are self-employed or are otherwise working from home, there can be a different set of distractions. This is especially the case if the task that needs to be done is not one that is particularly enjoyable. It is easy to find yourself wasting time on Net-surfing or household tasks.

“A good idea is to have a timer you can set to, say, an hour,” Alison Hill suggests. “Just the act of doing it is important, and it helps to keep you organised. There are apps you can get to stop you from looking at non-work websites but that is really just treating a symptom. You need to be clear on why you are doing this and how it fits into your day to avoid self-distraction. Making a task list can be a useful step.”

Amantha Imber points to the importance of having a dedicated work space, rather than just the kitchen table. This acts to cut out the distractions of the household and helps to build good work practices.

She also emphasises the value of planned time management, whether you are self-employed or working in a corporate environment. She divides her day between ‘maker time’ in the morning and ‘manager time’ in the afternoon.

“In the end, productivity is about focus,” Imber says. “Give yourself – and others – the time for proper thinking. It is thinking, ideas and innovation, and not rushing about, that makes a company successful.”

 

6 tips to avoid distractions

–        Establish a quiet space away from the office traffic

–        Set aside specific time to respond to messages rather than as soon as they arrive

–        Turn off the ‘notifications’ beeper for phone and emails

–        Inform your colleagues when you need time to focus on a project

–        Plan your day with a task list

–        Make sure you know the difference between busy-ness and genuine productivity

 

 

* Joanna Maxwell, Re-think Your Career In Your 40s, 50s and 60s, ABC Books, 296 pages, $33.

 

For further information, go to:

http://www.graceandgrind.com.au (site of Suzanne Williams)

http://www.joannamaxwell.com.au (site of Joanna Maxwell)

Appearing in Australian Financial Review, Defence feature, 29 November 2017

Philippines emerges as frontline player

Australia’s strategic links with the Philippines are quietly growing, on the twin fronts of maritime security and terrorism, and are likely to become even more important as Australia increases its own naval build-up.

“At one level, the relationship has been hampered by uncertainties over the Philippines President Rodrigo Duterte, who has a marked tendency for sweeping, colourful statements and not as much concern for human rights as many countries, including Australia, would like to see,” says Professor Benjamin Schreer, head of the Department of Security Studies and Criminology at Macquarie University.

“But when I spoke recently at a dialogue held in Manila on deepening the relationship between Australia and the Philippines, there was a very receptive audience on the Philippines side. You have to remember, as well, that many people in the Philippines military were trained in the West, especially the US, and they have a natural sympathy in that direction.”

 

A critical point is that Duterte’s occasional pro-Chinese, anti-American outbursts have not been matched by actual policy moves. In fact, US-Philippines defence co-operation has continued to increase, with the country recently taking delivery of sophisticated American equipment for maritime surveillance, including an advanced Tethered Aerostat Radar System. There has also been an agreement with Japan on the transfer of equipment and training for reconnaissance.

Professor Schreer sees these moves as evidence that the Philippines government is extremely wary of China’s expansion in the South China Sea. This has been especially true since an incident in 2012 over the contested Scarborough Shoal area. In that incident, there were low-level clashes between China and the Philippines. The US brokered an agreement under which both sides would withdraw. The Philippines forces withdrew but the Chinese forces did not.

“To the Philippines, the lack of action by the US looked like a betrayal,” says Professor Schreer. “But the government, especially Duterte, is making a distinction between the Obama administration and the Trump administration. Duterte seems more disposed towards Trump, in part because of Trump’s own wariness of China and partly because Trump has little interest in human rights issues.

“In fact, Duterte has shown himself to be a pretty good player. He is aware that China is very concerned about the US building a relationship with Philippines which could lead the deployment of substantial forces. He sees that he has some strong cards to play and is willing to use them.”

So far, there has not been much opportunity for bilateral defence co-operation between Australia and the Philippines, mainly due to an asymmetry of forces. However, this is changing as the Philippines upgrades its naval capacity. In 2016 Australia delivered five decommissioned landing craft to the Philippine Armed Forces, and the PAF has ordered two modern coastal frigates from South Korea, so there may be the opportunity for joint naval security exercises in the future.

The more immediate concern, however, has been a dangerous insurgency by the Maute, a radical group in the south of the country that has pledged allegiance to Islamic State. The group based itself in the city of Marawi in the province of Lanao del Sur on the island of Mindanao, and carried out a number of terrorist actions, including a bomb attack that killed 15 people in the city of Davao, Duterte’s hometown. The Mindanao-Sulawesi-Sabah triangle has long been seen as volatile but the Maute and connected radical jihadist groups are better-organised and better-equipped than other groups that have appeared.

Defence Minister Marisa Payne has made clear that Islamic State should not be allowed to gain a foothold in south-east Asia through affiliated groups or proxies. She has also noted that as Islamic State loses its territory in Iraq and Syria there has been a stream of battle-hardened, well-trained militants into Asia, an issue which should be treated as a serious regional concern.

Australia provided two Orion spy planes to provide surveillance support to PAF soldiers fighting militants in and around Marawi. About 80 ADF personnel played a critical role in training PAF soldiers in anti-terrorist urban warfare, drawing on their experience in Iraq and Afghanistan.

In October the Philippines government declared victory in Marawi, after a five-month siege and intense fighting that left large parts of the city in ruins. The battle left about 800 people dead, including 600 militants. However, few people believe that the insurgency is finished, with the surviving radicals still receiving supplies from allied groups in Indonesia as well as funding from other IS affiliates.

“The loss of Marawi was a very significant blow to the terrorist groups, but they still have the potential for attacks, as well as the capacity for re-generation,” says Professor Schreer. “One important change is that the PAF is putting more resources into intelligence gathering, and Australia may be able to assist with specialised training in that. They largely missed the threat posed by the insurgents until they had entrenched themselves in Marawi. They do not want to be caught like that again.”

 

END

 

Appearing on In The Black Digital site, October 2017

 

Reverse mortgages can be useful, but take care

 

“There is a significant number of retirees in Australia who are asset-rich, usually as owners of their house, but are cash-poor,” says Professor Louise Kloot, a consultant in the business education field and a key figure in the CPA Third Age Network, which focuses on retirement issues. “For these people, if they do not want to sell their house outright, a reverse mortgage can be a very useful tool. But reverse mortgages and equity releases have some traps and pitfalls, and it is the responsibility of accountants and financial advisers to understand them and explain them properly.”

In a recent a paper prepared by the Network, Professor Kloot explains that the most common form of reverse mortgage is a loan from a bank or other financial institution that allows the retiree to borrow money using the equity in their home as security. The loan is repaid when the home is sold, with the total amount including principal, accrued interest and fees. Most commonly, the loan is taken as a lump sum but there is also the option of a regular income stream or a line of credit.

A variation is an equity release, where a retiree sells a share of the house to a finance provider, calculated on a percentage basis. The retiree continues to live in the property rent free, and when the home is eventually sold the homeowner shares the funds with the finance company.

In many cases, the loan is used for improvements to the property, such as repairs or extensions. Loan providers require information on what the funds will be used for, and are generally very reluctant to provide the loan if the money is to be passed on to others, such as family members.

 

Providers wary

 

When reverse mortgages first appeared in Australia, in the 1990s, they were offered by most of the major financial institutions as well as many of the smaller ones. However, over the past ten years many institutions have moved out of the field, mainly due to the low interest-rate environment.

“The institutions currently offering reverse mortgages are Commonwealth Bank, the CBA subsidiary Bankwest, P&N Bank, and Heartland Seniors Finance,” says William McGregor, Senior Industry Analyst with IBISWorld, which has provided a research paper on the field. “The institutions that have provided reverse mortgages in the past have given commitments that the existing contracts will be honoured. But at the moment, and with reverse mortgages having a variable interest rate, there is simply not sufficient margin for them.”

According to the IBISWorld report, industry revenue declined at an annualised 4.9 per cent over the five years through 2016-17, to total $227.8 million. A further decline of 4.5 per cent is expected in the current year.

Professor Kloot notes that even those providers still in the market seem unwilling to advertise the product.

“There isn’t much in the way of brochures or information sheets,” she says. “You often have to go into the bank and inquire. But reverse mortgage products are occasionally mentioned in the personal finance sections of magazine and newspapers, so there is a continuing trickle of interest.”

 

Good advice needed

 

For people considering a reverse mortgage, Professor Kloot emphasises the need for independent financial advice.

“Because the payback date is often a long way off there can be a tendency to ignore the ongoing costs,” she notes. “The interest charges can build up over the life of the loan. So advisers have to carefully explain how compounding interest works, and ensure that the client understands it.”

There are also implications for Centrelink entitlements. This needs specialist advice as the consequences will depend on individual circumstances. Centrelink is likely to require supporting documentation about the loan as well.

From a regulatory perspective, reverse mortgages are considered to be a credit product by the Australian Securities and Investments Commission. On a few occasions, ASIC has required providers to change advertising to ensure that customers are properly informed.

Another regulatory move was legislation passed by the Commonwealth government in 2012 which stipulated that the maximum repayment is the market value of the property. This was meant to ensure that retirees could not be required to repay anything more than the sale proceeds of the house.

“That was a good safeguard,” says Professor Kloot, “but people looking at reverse mortgages and their advisers should note that it does not extend to things like real estate agent fees and other costs.”

Despite the pullback by many providers William McGregor believes that the reverse mortgage field will grow in the long term, as interest rates slowly rise and as the population ages. Industry revenue is forecast to increase at an annualised 3.4 per cent over the five years through 2021-22, to reach $269.8 million.

“Reverse mortgages have a role to play,” he says. “But they need careful consideration, an understanding of the implications, and an eye to the repayment date. It’s the sort of product that requires solid professional advice.”