Dear Member

Welcome to the May edition of the WA Local Government Superannuation Plan newsletter, brought to you by the team at Western Financial.

Latest News
	Budget Impact Salary sacrificed super contributions now count in the eligibility test ..read more
	Market Wrap Share markets recorded their first positive monthly return in six months..read more
	Fund performance April returns were positive for all investment options except Bonds and Yield..read more
	Dearson's Diatribe Western Financial Member Services Consultant, Chris Dearson shares his insightful views on the world of sport..read more

Budget 2008-09

The first Budget from the Rudd government did not present many major changes for the superannuation industry although the change to make Salary sacrificed super contributions now count in the eligibility test for government support will impact some members ability to access the co-contribution.

From 1 July 2009, income tests used to determine eligibility for a range of government financial assistance programs (including the Super co-contribution) will be tightened to include forms of non wage remuneration.

Specifically, salary sacrifice contributions to superannuation will be assessed as income for all relevant tax and transfer programs, including income support payments for customers below or at Age Pension age, family assistance, child support and a range of government assistance delivered through the tax system.

For the purpose of means tested benefits, the changes will mean that individuals who have access to salary sacrifice to reduce their taxable income will be treated on an equivalent basis to those who do not.

While this equity measure may reduce the attractiveness of salary sacrificing into super it is unlikely to have a significant impact on the level of salary sacrifice contributions

Read the Budget at a glance here.

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Market Wrap

Share markets recorded their first positive monthly return in six months following monthly declines of varying sizes being recorded since the last monthly rise in October 2007. The Reserve Bank of Australia left its official cash rate unchanged at its meetings in April and early May following the increase to 7.25% in March while the US central bank, the Federal Reserve further reduced its equivalent rate from 2.25% to 2.0% on 30 April. Reflecting the continued tight monetary policy stance (higher interest rates) of the Reserve Bank of Australia, the $A remained strong rising against all major currencies, with the RBA Trade Weighted Index being 2.6% higher.

As indicated above, the Australian share market had some respite after a decline of almost 20% over the five months to the end of April 2007. The market was given support by strong bulk commodity prices and positive developments in the US banking system where the US central bank again demonstrated its resolve to provide liquidity to the financial markets. The materials sector (which includes resource stocks) rose 9.3% during April. BHP Billiton rose 18.0%, Rio Tinto was up 11.1% and Fortescue Metal rose 13.8% on the back of strong iron ore prices. Rising oil prices helped the energy sector to record the strongest rise of any sector (+10.3%) during April. The larger stocks outperformed the small caps while not surprisingly resource stocks (+11.3%) significantly outperformed the industrials (+2.0%) for the month.

All major share markets rose during April, with the MSCI World ex Australia returning 6.2% in local currency terms but only 1.9% in $A terms due to the strong $A. As stated above, the US Fed reduced interest rates at the end of the month, while the central banks of the UK and Canada reduced interest rates for the third and fourth time respectively since December 2007 (from 5.75% to 5.0% and from 4.5% to 3.0% respectively). In contrast the European Central Bank maintained rates at the 4.0% set in June 2007 due to concerns on inflationary expectations in the Eurozone. Share market strength was relatively even across most major markets, with the respective MSCI indices in local currency rising by 6.3% in France, 8.0% in Italy, 6.2% in Germany, 6.8% in the UK and 4.9% in the US. Despite still weak economic data in Japan, its share market rose by 12.6% in a period of stronger global share markets during April, possibly as a reaction to the significant decline of the Japanese market (-28%) over the 12 months to March 2008.

After a decline of almost 30% in the six months ending March 2008 in an environment of very bad news in several trusts (including Centro and MFS), the listed property trust sector recorded its strongest monthly return since August 2007. Stocks which had previously been heavily sold off began to attract some interest from investors, particularly those which obtained a reprieve from debt refinancing concerns.

As mentioned above, the Australian official cash rate was unchanged in April, however 10 year government bond yields rose slightly, leading to small capital losses which negated income from the securities. Returns from both domestic and international hedged fixed interest were basically flat for April.

Source: Counterpoint Group May 2008

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Fund Performance

April returns were positive for all investment options except Bonds and Yield.

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Individual Monthly rates (PDF)

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Individual Monthly rates (PDF)

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Dearson's Diatribe - The world of sport according to Chris

Footy

It just gets worse and worse for the Eagles and the Dockers with each racking up 7 losses from 8 games to last Friday. Lucky that Melbourne are around or they would be battling for the wooden spoon already, though both are still in the running.

Woosha is starting to blood his rookies as there is not much else to get out of the season except which top drafts they can get this year.

Cricket

The IPL seems to have been a success -  the time the games are on has not helped in Oz but overseas support means this is probably here to stay.

Test cricket is back with the Aussies on their Caribbean Cruise and temporary absences of Hayden and Clarke are giving fringe players a chance.

England and the Kiwis played out a weather affected drawn 1st Test in London.

The game was heading for a draw from the 1st day. So there is little to say yet whether the poms are looking good for next year’s Ashes series - the UK media hype is still months away!

Rugby

The Western Force’s only consolation for this season was the dramatic win last week against the Brumbies. While it is always great to beat the Brumbies, letting them to a 22 nil lead and then coming back to win 29 - 22 is enough to cause heart attacks in the Subi crowd.

John Mitchell described 2008 as a wasted season - have to agree!

Soccer

Can all members who know Gavin Smith from our Retirement Planning team please send him a condolence message as he is a Chelsea supporter. Gavin is holding up very well considering the last 2 weeks.

He has watched his team fail to win the Premiership and then blow up in the penalty shootout for the European Cup - both times to ManU as well. The smile is a bit weak but at least the tears have stopped.

I felt so sorry for him, I have even stopped mentioning losing to Spurs in the League Cup final.

Never mind Gavin, there is always next year.

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