Centrelink blow for millions of Aussies as cash boost denied: 'Really tough'
However, there won't be any more money allocated to the millions of Australians receiving social support payments from Services Australia. A poll of more than 3,600 Yahoo Finance readers found 40 per cent supported an increase to Centrelink payments (40 per cent).
Mission Australia's executive of practice, evidence and impact, Marion Bennett, told Yahoo Finance that JobSeeker was in desperate need of an increase.
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"The cost of living is biting hard, and for people who are reliant on welfare payments, life is really tough.
"It's really hard to pay rent, plus pay bills, electricity and whatever, to put food on the table, to pay for medical and dental expenses, expenses and everything.
"And we're finding that more and more people are skipping meals so that they can pay the rent."More than 800,000 people are on JobSeeker, the second-biggest number of Centrelink recipients after the Age Pension.
Mission Australia backed the Economic Inclusion Advisory Committee's latest report that said JobSeeker deserved to jump to 90 per cent of the pension.
That would increase the Centrelink payment from $56 per day to $74 per day.
The Australian Council of Social Services believed the daily amount should rise to at least $82.
The Committee's report found JobSeeker payments "continue to fall short of all benchmarks, creating sometimes severe hardship for our neediest citizens".
It found there were benefits to substantially increasing the Centrelink amount including:
Increasing overall well-being in Australia
Lowering spending on government services
Improving recipients' mental health
Allowing recipients to afford medical care and purchase medicines, which could raise their capacity to participate in paid work and community activities
Improve the education of families on JobSeeker
Several Centrelink payments recently went up by a few dollars to keep pace with inflation under twice-yearly indexation.
However, many of the people who are on these financial lifelines said it's nowhere near enough.
Perth resident Damien, who's been on JobSeeker for more than five years, told Yahoo Finance that the "paltry" extra $3.10 per fortnight won't do anything to help him keep up with the cost of living.
"I just scoffed at it. I just feel like not accepting it. It's not going to do us any benefit at all," the 62-year-old said. "$3.10 isn't even a litre of milk. We're supposed to be the lucky country."
Linda, who is on the disability support pension, was equally furious.
"That $3.50 pay rise we have just received from Centrelink is nothing short of a bloody insult," the NSW resident told Yahoo Finance.
Disabled pensioner Trudi, who lives in government housing told Yahoo Finance that every time her Centrelink payments go up, so does her rent.
"We get absolutely nothing, it's bulls**t," she said.
"The government is slapping itself on the back, beating its chest... it's not enough, it will never be enough."
The indexation that hit accounts last week affected JobSeeker, the Age Pension, ABSTUDY, Commonwealth Rent Assistance, Disability Support Pension, and the Carer Payment.Sign in to access your portfolio
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So here is a chart that takes the S&P 500 for stocks, in green, we have the Bloomberg Aggregate Bond Index, and then in managed futures, I'm using the SGCTA Index, which is a little bit different than the one I was just showing, but this time series goes all the way back to the beginning of the century. And what I said before, the S&P 500 only turned positive 20 in 2013. And that's because there was a double top created by the dot-com boom and also the global financial crisis high. But then it managed to gain 333% from those lows to this high right here. And then in the meantime, bonds had a more steady incline, and over that period, they've they've eked out about 172%, which is a nice return there. And managed futures, coincidentally, this is pure coincidence, they managed to also return about 170%. But the paths by which bonds got there and managed futures got there were a bit different. Bonds had a more steady incline into about the early pandemic, but then they had a huge decline in that 2022 year that I was talking about. Meanwhile, managed futures tended to go sideways. There's a little bit of an uptick here, but they tended to go sideways to down in the teens. And that's when we had those zero near zero interest rates combined with low growth. Arguably, we have transformed into a new market environment, but I'll get to that in a second because now I want to show you what the allocation looks like if you have just 100% stocks, and that's going to be the S&P 500 in white. So that's basically the same white line as a previous chart. But then in green, we have 60% stocks and 40% bonds, and then in blue, we have 60% stocks and 40% managed futures. And since the total return of both bonds and managed futures was the same amount, well guess what, the allocations for them, the 60-40 either way, is going to also be the same. Uh and if you were to do a 60-20-20 portfolio, it would kind of be in between these green and blue lines, but I didn't want to complicate the situation unnecessarily. We have to move on. I want to show you the a table of all the stats put together, but first, I need to define the Sharpe ratio for you. This is the excess return over the risk-free treasury rate divided by volatility. So this shows you how much reward you can earn per unit of risk. And this is kind of the standard when people talk about volatility adjusted risk. They want to take out that risk-free rate, and let's say the S&P 500 earned a return of 10% this year, and treasury bills are returning 4%. Well, you only give credit for the S&P 500 6%. That's beyond that 4% to reach that 10%. So that's the critical distinction there. Now to break down this chart, S&P 500 by itself got a return of 333%, bonds 172%, coincidentally managed futures right there with it at 173%. Average daily returns are going to be about the same for both managed futures and bonds, and then we look at risk, standard deviation of the of the daily returns. The higher this number, the more the risk, the more volatility you suffer. And so we had 1.23% risk in the S&P 500 or stocks compared with a much lower number for bonds, 0.27, and a lower number for managed futures as well, 0.53, although managed futures managed to be twice that risk of bonds. And now here's the key stat, Sharpe ratio, and I'm going to go over this. We have the S&P 500 with a Sharpe ratio of 0.33, and we want to see this number larger. A larger number is better. Bonds by themselves were 0.65, and managed futures 0.33. So for instance, if you were to compare the S&P 500 and managed futures, you have a much higher return, 333%, with about the same amount of risk. But why would you want to combine them? Because they will do differently. They will perform differently at different parts of the business cycle. And so you want something that's going to buffer those stock losses with hopefully gains. And that's part of what managed futures and bonds are supposed to do, but they don't always do that. Um so here we have instead of each of the markets by themselves, this is my final slide. Uh this is a blended portfolio. So in this column we have S&P 500 versus bonds, that's 60-40. Then we have S&P 500 versus managed futures, 60-40, and then we have S&P bonds and managed futures, that's a 60-20-20 portfolio. And you can see the returns are just about the same for all three of those. Again, that's just a coincidence. Uh the same for the average daily returns, but then when you get into the risk, you're going to see a higher risk, actually, the highest risk for that 60-20-20 portfolio. And if you're looking at the Sharpe ratio, going for the largest number, it happens to be bonds, S&P 500 and bond 60-40 portfolio. Although it's not that much higher than some of the other categories. Excuse me. A lot of talking here. Uh the bottom line is I do believe we're in a different market environment, and as I was saying, managed futures managed to perform admirably well during the downturn of 2022 when we had a lot of risk, but we also had things in commodities that were trending well. And that has to do with the higher inflation environment and also the fact that we have maintained higher growth as opposed to what we were seeing in the teens. So going forward, if we are in a new playbook, you might want to consider some of these alternative investments like managed futures for your portfolio. And tune in to Stocks in Translation, the podcast, for more jargon busting deep dives. New episodes can be found Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcasts.
