No rate cuts til May; blowtorch on super funds sorely needed

1. Interest rates in Australia won't fall for another six months

2. Super funds are, rightfully, under the blowtorch

3. Amcor packs a punch

4. For investors the world is getting smaller

Anyone who's inspected a property knows the questions an agent will ask. What's your price range? What do you think it's worth? What's your best offer? The Property Pendulum, presented by Fear & Greed and Domain, reveals how to answer the questions homebuyers dread, and how to put yourself in the best position to negotiate a good deal.

Listener Phil asks:

"What's the point of AGMs anymore? Previously they seemed to be for the retail investors, the mums and dads to go along and have their say. Now the big investors like super funds have so much sway that they don't even need an AGM to get their point across. Is there still value in an AGM?"

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- Sean Aylmer

The earliest homeowners will get some interest rate relief on their mortgages is May next year. The Reserve Bank made that clear in the minutes of its board meeting, released this week. The central bank wants to see more than one good quarterly inflation figure before moving on rates. What is "good"? We know Reserve Governor Michele Bullock doesn't think the current underlying rate of inflation, at 3.5 per cent, is "good". She told us at her press conference two weeks ago. The next quarterly reading comes in late January, and then the reading for the first quarter of 2025 arrives in late April. If they are both lower than 3.5 per cent, and that probably means the first one (in January) needs to be low threes and the April reading almost in the twos, then we will see a rate cut. But until then there is nada for homeowners. It isn't certain that underlying inflation will fall enough to cut rates. Not helping is the election of Donald Trump and bond market investors' views that interest rates are now higher for longer. The new norm is much higher interest rates than we have had over the past decade, and probably rates not much lower than where they are now.

The blowtorch is shifting onto Australia's $4 trillion superannuation industry. And so it should. Over the past week we have had ASIC launch action against Cbus, alleging it delayed paying up to $20 million in death and disability payments to people most in need. Cbus is also under fire for making payments to discredited union, the CFMEU. Another giant of the industry, HESTA, will be forced to compensate more than 120,000 members who had their retirement savings stranded in unlisted property assets, when valuations tumbled in the early days of COVID. The super watchdog, APRA, says HESTA's processes were inadequate. Yesterday, ASIC threatened superannuation fund executives with penalties if they do not fix their customer service failings. The regulators want the super funds to clean up their acts and improve corporate governance. Super funds hold our money, and most of us have no option but to provide them with 11.5 per cent of our earnings each pay packet. They need to be cleaner, and more transparent, than anyone else in the market. Yet the rules applying to super funds don't appear as stringent as those applying to ASX-listed companies, for example. The super funds are in for an uncomfortable ride from regulators. And they should be.   

The answer is probably yes, but only because it gets a bunch of leaders in the same city and they get to talk to each other. This week's G20 in Rio De Janeiro included US President Joe Biden, China's Xi Jinping, UK Prime Minister Keir Starmer, our own Anthony Albanese and others, but not Russia's Vladimir Putin. The final communique, released this morning, was weak. It gave climate stragglers Russia, China and India the okay to keep polluting beyond 2050. There was little direction about the war in the Middle East, outside the G20's "deep concern about the catastrophic humanitarian situation in the Gaza Strip and the escalation in Lebanon". Russia wasn't mentioned and the statement watered down previous rhetoric on nuclear weapons. All this as Russia stepped up threats of a nuclear response after Ukraine struck a military base on Russian soil. But at least Mr Albanese met Mr Xi, and the improvement in relations with our biggest trading partner continues. That is more important than ever with the threats of major tariffs from the US. The UK backed AUKUS - another tick given the new US Administration next year. In the past 1,000, days, Russia's attack on Ukraine, the Hamas terrorist attack on Israel and that country's response, and the election in the United States have made the globe a more dangerous place. Meetings between global leaders are worth it.

The  S&P/ASX200 hit a new high this week of 8,446 points, with a bunch of stocks from different parts of the economy at or near record highs. These include Aristocrat Leisure, Brambles, Commonwealth Bank, Goodman Group, JB HiFi, Pro Medicus, Qantas, REA, WiseTech Global and Xero. More than 30 per cent of the local market are financials, of which the big four banks dominate. The big four, especially Commonwealth Bank, are expensive. Very expensive. When they do well, the market does well, and it is hard to see where the up side is for the banks. There's another reason why the local market might struggle. In 2024, it is very easy for retail investors to buy overseas shares - much easier than five years ago, let alone a decade ago. Fees levied when buying into the US, Europe and Asia are falling. Exchange traded funds are easy ways to get exposure to offshore companies. Brokers are making it easier for individuals to understand and calculate the tax implications of offshore investing (though the weakness of the Aussie dollar remains a barrier). AI backed platforms assist individuals in making investment decisions.  Moments in time such as the election of Donald Trump, and the associated Trump trade, encourage investors to think about Wall Street. Finally, one of the most fundamental principles of investing - diversification - benefits from offshore investing. There's likely to be a flood of Australian retail money heading overseas.

The world's largest packaging group Amcor is on the verge of doing one of the biggest corporate deals ever by an Australian company, offering to buy out a US-listed company, Berry, for about $13 billion ($US8.4 billion). If successful, the new group will have 400 packaging plants around the world, 75,000 staff and thousands of customers in consumer and healthcare packaging. It is an all-script bid - Berry shareholders end up owning Amcor shares - and the group expects to extract a whopping $US650 million in synergies. Amcor's primary listing nowadays is on the New York Stock Exchange, its head office is in Zurich, but it began in the 1860s as a paper miller on the banks of the Yarra River in Melbourne. It listed in New York when it spent $US6.8 billion buying Bemis Co. back in 2019. If the deal is done the new group will turnover about $37 billion and make about $6.6 billion in pre-tax profit. There is plenty of execution risk in the deal, but it is an example of an Australian company making good on the global stage. There hasn't been many Australian non-miners to do so in recent years (James Hardie, Aristocrat Leisure and Cochlear are exceptions) but Amcor is giving it a crack. 

5. Are G20, APEC, NATO worth the effort?

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Oil giant Santos says it'll boost returns to shareholders once its major projects in Alaska and the Timor Sea come online. The Pikka project in Alaska is particularly intriguing - because it aims to produce 80,000 barrels of oil per day in one of the most remote parts of the world. Alaska's North Slope is pretty much as far north as you can get.

This timelapse video from Santos shows part of the Pikka pipeline being constructed. Look at the blizzards blowing through the worksite - it's hard to think of a more challenging place to be building a pipeline.