medfin

Can you describe Australia's present economic climate?

We are experiencing a period of unprecedented global financial turmoil. On a relative basis Australia has been less impacted than many other major economies including the US and UK. Nevertheless, expectations for growth in Australia have been cut dramatically over the past 6 months.

How long will we face these conditions?

It is difficult to know how long the current slow down will take. At this stage the Reserve Bank is forecasting a recovery in growth in 2010. Given how quickly the outlook has deteriorated and the fact that most of the news is causing expectations to be revised down, it is possible that the slowdown may be more protracted than people are anticipating at this stage.

Is it all doom and gloom for the heath care industry?

Historically the health sector has performed relatively well in periods of economic downturn. Given a lot of healthcare spending relies on government funding and most people are reluctant to defer spending on their health, particularly if they need urgent treatment, the outlook for the industry remains relatively positive. Having said that, areas of the industry with exposure to retail spending may see the slow down in discretionary spending impact their retail profit centre.

Are you predicting a drop in interest rates? If so when?

Over recent months the economic data has been consistently weaker than what was expected. This has led the Reserve Bank to cut rates more aggressively than previous market predictions. Most interest rate commentators are predicting further cuts in interest rates by the Reserve Bank. Medfin is owned by NAB, so we have access to some of the best economic brains in the country. NAB economists are currently forecasting another 1.25% reduction in rates in Feb/March 2009.

Will it be more expensive to buy equipment next year?

As most practice equipment is manufactured overseas, foreign exchange rate movements will have an impact on the cost of equipment. We have seen a dramatic fall in the Australian dollar against the United States dollar over the last 3 months. It has fallen from around 0.95c to the US$ to 63c to US$. This means it is costing more to import practice equipment and some or all of the additional costs may be passed on via higher equipment costs. It is worthwhile remembering though that for cash flow and taxation reasons, most equipment is financed. So while exchange rate movements are putting upward pressure on equipment costs, this is being offset by falling interest rates which in turn reduce finance costs. So if you are looking at buying equipment, consider the whole picture, including interest rates and financing costs.

Should I wait for interest rates to drop before investing in residential property?

There are plenty of people who have views on when is the right time for residential investment. Only hindsight will reveal what was the best time to purchase a property. Medfin is still supporting clients who are residential investors. We can lend up to 100% of the property value which means that clients can maximise the gearing on the property if they are looking to negative gear and also that there may be no need to put a deposit towards the property.*

Rents have been increasing in recent years and vacancy rates have been falling. With unemployment expected to increase over the next 12 to 18 months it is possible that this trend may stall or even reverse. I suggest you allow for this scenario when you are doing your sums on property investment.

Is it a good time to buy my practice premises?

Given the relative 'strong' position of the healthcare market we expect to see solid investment levels maintained. Each practice purchase scenario is different and needs to be looked at on its' own merits. Remember to do your sums and make sure you are covered if things do slowdown more than expected.

How secure are NAB and Medfin in the current economic climate? Will Medfin continue to lend and will its funding be competitive?

Medfin has over 18 years of experience financing Australian health practitioners. We are in a strong position with our exclusive focus on the healthcare industry and our ownership by NAB. NAB is a AA rated bank and has been less impacted by the financial crisis than many overseas and second tier financiers. Through NAB we have ongoing access to funding at competitive rates.

Medfin is a part of NAB Health, a division within NAB dedicated to providing a full suite of financial solutions to the healthcare industry. We will continue to work closely with our NAB Health and HICAPS counterparts to provide total business, investment and personal finance solutions that are custom designed to suit the needs of health professionals.

Are there investment opportunities in this climate? Do other healthcare professionals see these opportunities or is it just me?

Many of our healthcare clients are looking to take advantage of the current economic slowdown to make investments. The prospect of distressed asset sales and the potential for falling asset values may provide some attractive investment opportunities over the next 12 to 18 months.

What advice would you give to a small to medium size practice owner in this climate?

All business owners and practice managers should be reviewing both their personal and business position in the current environment. Look at the downside and make sure you have plans to cope with a slowdown. Balance this assessment and take some time to consider the investment/growth opportunities that may be available in the current environment.

Questions that you may wish to consider are:

• What impact could the current economic slowdown have on my patients?
• What are the potential impacts on my income levels?
• What can I do to respond if my income reduces?
• How can I protect my wealth in the current environment?
• What opportunities could there be to expand my practice in the current environment and how am I placed to take advantage of these?
• What opportunities could there be to invest outside my practice in the current environment and how am I placed to take advantage of these?

What words of optimism?

While there is a lot of doom and gloom around at the moment, the Australian healthcare industry is relatively well placed compared to most other sectors of the economy. So while things may get tougher, there will be opportunities as well as challenges over the next year. The key is to plan. Have a strategy in place to handle any downturn in your income and to assess how you might take advantage of investment opportunities over the next 12 to 18 months.

Your local Medfin Relationship Manager can be contacted on 1300 361 122 or visit medfin.com.au for further information.

Important information: This information is current as at 5th December 2008 and is of a general nature only. Statements about future matters may not be realised and should not be relied upon. Because we do not know your objectives, please consider whether these options are appropriate for your circumstances. To the extent allowed by law, National Australia Bank Limited ABN 12 004 044 937, Medfin Australia Pty Ltd ABN 89 070 811 148, their affiliates and their respective directors, officers, employees and agents ("NAB") disclaim any warranty or representation about the accuracy or completeness of this information. NAB will not be liable in any way for any direct, indirect or consequential loss or damage however caused, whether in negligence or otherwise, which may be suffered by any person relying on the information, or otherwise arising in connection with this information or any omission from it. This information is subject to copyright and any reproduction of it without the prior written consent of the copyright owner is prohibited. * Approved customers only - subject to credit assessment.