Money Matters with Adrian Murphy

Dec 7 2012 by Adrian Murphy, Ayrshire Post

George Osborne has decided to run it right to the wire before making his autumn, or should I say, winter statement this year.

Unfortunately this is unlikely to be because he was waiting to give us all a nice early Christmas present, such as a reduction in VAT.

The reason is probably that he has had an awful lot to think about. After making cuts of a few hundred million here and a billion there, little has changed if anything. He has to look to stimulate growth if he wants to make an impression on the budget deficit. I am all for making the country more efficient and less reliant on the public sector, but the government’s policies are choking the economy and not encouraging the private sector to pick up the slack.

There can be no starker example of this than looking at these GDP figures.

China’s has risen from $3460 billion in 2007 to $7990 in 2012; Germany from $3320 billion in 2007 to $3480 in 2012.

Japan’s GDP grew from $4350 billion in 2007 to $5980 in 2012; India’s from $1150 billion in 2007 to $1780 in 2012; US’s from $14,020 in 2007 to $15, 610 in 2012.

Meanwhile others have fallen. Greece from $311 billion in 2007 to $271 in 2012 and the UK’s from $2810 in 2007 to 2450 in 2012.

As you can see the only other country other than the UK, that hasn’t grown beyond the 2007 GDP figure is Greece. The other major developed nations are all in positive territory and some by quite a distance.As I am sure you are aware we have also yo-yoed in and out of recessionary quarters over the last couple of years. This is surely a clear indication that something has to change. Austerity has failed, as not only is the economy struggling but also the chancellor will have to borrow something in the region of £13bn more than expected this year, effectively wiping out any cuts. The failure of Quantitative Easing to get banks lending to small business and the mortgage market has contributed to the rather depressing economic picture.

I am glad to say that in our job as financial planners we have at least seen good returns and relatively stable investment markets over the last 12 months. It is important to remember there is a disconnect between the economy and investment returns. What this has shown us is that there has never been a more difficult time to make good investment choices. Utilising the right expertise is essential to make the most of the opportunities available.

If you would like to know more about this please contact us at moneymatters@murphyfinancial.co.uk