Christian Education National Annual General Meeting

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Christian Education National Annual General
Meeting Peter MurphyChief Executive Officer
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Disclaimer
Christian Super is managed and controlled by
Christian Super Pty Limited ACN 065 040 619.
This company holds an Australian Financial
Services Licence (AFSL 244117) to provide general
financial product advice about superannuation
products. Current or prospective members or
employer sponsors should refer to Christian
Supers Financial Services Guide (FSG) available
from the presenter of this session, from our
Helpdesk (Phone [phone]) or website
(www.christiansuper.com.au). Christian Super
Pty Limited is not licensed to provide personal
superannuation advice or advice not related to
superannuation. Before acting on our advice you
should seek personal financial advice from a
licensed financial adviser.
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Presentation Goals

• Update on the Global Financial Crisis
• Implications from Christian perspective
• Tips in dealing with it
• Overview of key highlights from Christian Super
  over the past 12 months

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A skip around the world
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A skip around the world
United Kingdom- Major banks bailed out by
govt- Rate cuts to 0.5- Housing mkt has
deteriorated - Unemployment looming
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A skip around the world

• Europe- Central Banks take control- ECB cuts
  rates dramatically
• Will EC survive
• Return to protectionism

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A skip around the world
USA- Jobless claims highest since 1982 -
Housing market at record low since 1963 although
trough is now reached- Dow up 25 since low of 2
March 2009 - Green shoots starting to appear
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A skip around the world
Japan-Economic Fundamentals (GDP, interest
rates, unemployment) are weak - Basket case!
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A skip around the world
China- Growth is at slowest pace since records
began in 1992- Benefits of path of
industrialisation now internalised
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A skip around the world
India- Growth forecasts revised down for 2009-
Weak manufacturing, falling exports, closing
credit tap in banking sector
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A skip around the world
Pakistan- IMF moved in to bail out government,
seen as a narrow avoidance of default- Real
risk of Taliban rule
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A skip around the world
Iceland- Double digit contraction predicted for
2009- All 3 major banks collapsed in 1 week-
Elections 2 years early after mass protests
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We can say the word Recession
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We can say the word Recession
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We can say the word Recession
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AND then there is Turkmenistan
Turkmenistan- IMF 2009 GDP forecast of 6.9
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Result is a Synchronised Economic Downturn
Source Ausbil Dexia, Thomson Datastream
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International Responses
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International Responses
G 20 Summit - US 1.1 tr - 2.0 world growth-
Financial Stability Board- Hedge Funds- Credit
Ratings oversight- Monitoring Accounting
Standards
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International Responses

• USA- TARP 700bn bailout of finance
  institutions- Obama fiscal package (75 GDP for
  2009/2010)- Buy American Campaigns- Auto
  Company bailouts?- 2009/10 Robin Hood Budget
  (2 trillion deficit) - 275 billion home owners
  mortgage subsidy- Interest rates at 0.0
• FOMC - Official target is 0-0.25
• Quantitative Easing

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International Responses
United Kingdom- Interest rate cuts to 0.5-
Support of financial institutions- Support for
the Auto industry- Value Added Tax cuts-
Increased spending on social housing and
infrustructure- Support of financial institutions
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International Responses
Europe- Significant rate cuts- Limited
quantitative easing - Government injection into
banks
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International Responses
China- Lowering interest rates- First home
buyers support -December stimulus package
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International Responses
Australia- Interest rate cuts- One off
payments- Guarantees of debt- Cash Splash -
Budget Deficits
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Quantitative Easing

• Adopted in USA, UK and Europe
• Goals
• Inject cash into the monetary system
• Hopefully lower longer rates and mortgages
• Weaken currency

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Quantitative Easing

• Not a great track record
• Weimar Republic 1930s
• Latin America 1980s
• Zimbabwe 2000s
• Opens the flood gates to inflation and no one is
  sure they know how to turn it off
• Timing is everything
• A stitch in time saves nine Milton Friedman

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Why this is not Japan 1980s

• Japan Policy responses
• Slow to cut interest rates
• Slow to recapitalise banks
• Banks slow to write off their bad debts
• Slow to put in fiscal measures
• Quick to withdraw fiscal measures

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Green Shoots

• Some observations of an improvement
• German economic sentiment up
• Manufacturing indicies are beginning to bounce
• US jobless, home retail sales reports are
  moderately better
• US Stress Test No nasty surprises
• Chinese manufacturing on the improve

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What to
expect now...
Financial Markets
- Ongoing volatility and uncertainty
Economic Growth
- Synchronised downturn green shots or dead cat
bounce
Finance
- Increased difficulty in obtaining loans of all
types
Inflation

• Great unknown deflation, inflation or
  stagflation

Interest Rates
- Cant get lower than zero
Unemployment
- Major social problem
Government Debt
- Massive debt burden undertaken that will need
to be paid off
Currency
- Dependent on commodity prices
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Australian Economy
Inflation
- Largely being ignored
Interest Rates
- 400 basis point drop since September more to
come ????
Oil
- Largely under control for now !!!!
Unemployment
- 8.5 estimate is above the average of 7.25
GDP
- Recession will it be worst on 6 post war
recessions
Currency
- Trade in the 75 c to 85 c range
Commodities
- Were overpriced
Equity Markets
- Market sentiment drives shares rally since
Mar 09
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Australian Fiscal Stimulus Package

• An overview
• 42 Billion in total
• 12 Billion in one time cash payments
• 29 Billion in infrastructure and development
  projects that seem to lack a coordinated vision.
• Plus an expansionary budget

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2009 2010 Budget

• 58 billion budget deficit due to increased
  spending and reduced revenues, however, there
  some optism
• Friedman / Keynes
• Infrastructure / Clean Energy
• Medicare changes
• ....but some caution
• The forward estimates of growth
• Government containing spending into the future
• But expect that there will be more to come ....

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Cycles and Lags
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Recessions do happen
Source BEA, NBER
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Christian Perspective
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Lets Get Some Context

• Soaring New Economy Stocks Go Bust,
• Corporate Corruption Scandals Threaten Market
  Integrity
• -1870, Railroad Stock Slump
• Think about the following headlines Sudden
  Spike in Oil Prices Causing Angst. Unrest
  Continues in the Middle East. Congressional
  Action Likely on Windfall Profit Tax.
• Were they written during
• 1973 Oil Embargo
• 1979 Iranian revolution
• 2008
• All of the above

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Global Financial Crisis and Recession
US Subprime Crisis
What happened
High household debt. Excessive leverage in
financial sector
Tighter credit
Increase in risk aversion, pressure to deleverage
Weakening GDP growth and rising unemployment
Housing bubble burst
Bank losses, failures
Asset price falls (houses, securities e.g. MBS,
CDOs)
Defaults on mortgages and over-supply of housing
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Why does these happen
Recently Queen Elizabeth asked
If these things were so large, how come everyone
missed them?
Professor Luis Garicano from the London School of
Economics replied
At every stage, someone was relying on somebody
else, and everyone thought they were doing the
right thing
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this is
GROUP THINK
The act of reasoning or decision making by a
group, especially with uncritical acceptance
Do not conform to the pattern of this world, but
be transformed by the renewing of your mind. Then
you will learn to know Gods will for you
Romans 122
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Key Christian Principles
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Understand the real GFC

• Understand the global impacts of our greed
• 400,000 children will die additionally this year
  as a result of the global economic downturn
• Millennium development goal progress and aid
  organisation programmes will be severely
  threatened
• G20 decided not to cut back on aid
• Watch for protectionism that hurts developing
  countries most
• Consequences felt most by those who werent the
  problem

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Remember the essentials

• Focus on your eternal significance (Col 31)
• Recognise that post modern materialism where
  value is found in worth of assets has resulted in
  greed and fear. (Luke 1215)
• Prepare for opportunities to present the true
  security that can be found in the gospel (Act
  412)
• Understand how to become a good steward of Gods
  resources (Psalm 241)

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Four Tips for personal finances

• Think long term
• Spend less than you earn
• Maintain emergency savings
• Minimize use of debt
• Surviving Financial Meltdown, Ron Blue/Jeremy
  White

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Christian Super Highlights
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Our Vision To see people living life with
financial health and understanding
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Mission Focus
Areas
Member Care
Financial Education
Product Development
Biblical Investments
Organisational Ethos
Communication
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Member Care

• Now over 18,000 members with member growth
  greater than 8 p.a.
• Annual Member Surveys with more than 700
  respondents plus Focus Groups
• Answered over 7,000 calls through internal
  helpdesk
• Visitations to employers
• Correspondence review

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Financial Education

• Cornerstone Wealth
• Statement of Advice
• Life Event Plan
• Masteringmoney.com.au
• Fact Sheets

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Product Development

• Significant enhancement to insurance with
  better premiums
• Death TPD
• 3 units automatically
• Missionaries covered excel DFAT Level 5
• Income Protection
• Automatic acceptance
• Levels increased
• Home contents insurance
• 2nd Cash Account

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Biblical Investments

• Winner of Sustainable Fund of the Year 2008
  (Ethical Investor)
• Nominated for Affinity Award (AIST)
• Internalised ethical research
• Internal Fixed Interest and Cash Management
• Australia equities screening outperformance

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Communication

• Introduction of key communicators
• Annual Report
• Employer Guide
• Revamped
• Member News
• Product Disclosure Statements
• Website upgrade for 30 June

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Organisational Ethos

• Rhodes relocation
• Head count of 10 covering
• Investments
• Help desk
• Ethical research
• Compliance
• Summer intern program

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About
super
A long-term investment for retirement
Temptation to panic
Insurance within super can be great value
Employer contributes, you can contribute
Government may contribute in certain circumstances
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Bernie Frasers DOS

• Continue salary sacrificing and / or making
  additional contributions
• Be wary of people or products promising
  unrealistic investment returns
• Make sure you get what you need from super
• Take the opportunity to consolidate your super
  accounts into one account
• Think carefully before making any sudden
  decisions

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Bernie Frasers DONTS

• Dont forget super is a long term investment
• Dont be pressured into making any major
  investment decisions
• Dont dash for cash per se (although think about
  to parking)
• Dont think DIY super is easy
• Dont put off retirement unless you seek
  professional advice

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1300 360 907 christiansuper.com.au
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ChristianSuper Performance
(1) Growth Option (7030) until 2005, then
became Ethical Growth(2) Mercer Pooled Fund
Survey or comparable industry survey. Figures
before 2007 use year to 30 June performance
figures
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