November 2020 – Confidence returns

Newsletter

It is that time of the year again where I discuss the year ahead.

GPS moved very cautiously into 2020. We pulled back from writing loans and accepting new investments, which turned out to the be the right move. I am more confident for 2021. No elections for a start!

On the positive side, I have seen signs of an increase in interstate migration to Queensland. This appears to be driven by lifestyle, more affordable housing, and the perception that Queensland is, and will for years to come, be a haven from COVID. The acceptance of remote working also assists.

This has now been supported by statistics from the Australian Bureau of Statistics (see below table).

Despite border closures, there was net migration to Queensland of 6,750 people in the June 2020 quarter.

The next highest increase for a state in that period was Tasmania with 387. Interestingly, Victoria had a net reduction in population from interstate migration of 3,042 people for the same period!

Source: Australian Bureau of Statistics (https://www.abs.gov.au/statistics/people/population/regional-internal-migration-estimates-provisional/latest-release)

The negative side looks like a potential drop in the GPS distribution rates. The Reserve Bank have made it clear that the low interest rate environment will continue for at least 3 years.

GPS will continue our hard work to maintain our current distribution rates for as long as we can. This has been a key factor in our delay in reopening for new investment.

We will not lower the quality of loans just to be able to accept new investment; the old “first, look after what you have got” adage.

We will have to wait and see where the economy goes and monitor the level of competition for loans.

While the GPS modeling shows that we should be able to fully reopen for new investment in March 2021, I am a bit gun shy of making this prediction. I was saying we would be open in March 2020 this time last year.

GPS can only accept sustainable levels of new investment. We will mostly start accepting any new investments into our GPS Invest Select Fund.

We need to see what 2021 has in store for us before reopening our GPS Invest Pooled Fund.

Richard Woodhead, Managing Director

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