David & Libby The good old days are now

Here is why we need to stop whingeing

RIGHT up front, we declare we’re optimists by nature.

But we’re not naive. We don’t look at the world through rosecoloured glasses. We do see the problems, we know things could be better, we know some people do it a lot tougher than others, but we look for the positives.

We like to think of ourselves as realists. And we’re driven by facts ... not political spin, not negative social media rantings or unfounded scaremongering.

So how is the financial wellbeing of the average Australian at the start of 2018?

The answer is; pretty good indeed. Despite the profound negativity and general grumpiness permeating through the media and social media, the facts are we have a lot to be grateful for.

WE’VE NEVER BEEN RICHER

The latest household net worth figures show the average Australian is worth about $400,000 which is up $22,000 over the previous year. To put that in some context, according to the Credit Suisse Global Wealth Databook, the average Australian is the second wealthiest in the world behind the Swiss.

We acknowledge it doesn’t feel like it to a lot of Australians because that increase in wealth has come through superannuation returns and a rise in property values at a time when wage gains are very subdued. In other words, we’re asset rich but cash poor.

Our wealth is rising but we don’t get the cash-in-the-pocket benefit until we retire or sell the house ... it doesn’t help with the weekly groceries or buying new school shoes for the kids.

Hopefully a strong jobs market will solve this.

OUR SUPERANNUATION HAS BEEN PERFORMING WELL

Of the average net wealth of Australians, 21.6 per cent is held in superannuation. Even though those compulsory contributions are unseen, superannuation is becoming a big deal for all working Australians ... which is why we all need to take a closer interest in its performance and management. So check those statements when they come in and get good advice on whether you’re in the right fund.

Our superannuation funds have also been performing pretty well. Over the past year, the best funds returned around 10-14 per cent which, given the low interest rate and inflation environment, is pretty good.

The results last year were certainly helped by a rise of 12.5 per cent in share market returns(prices plus dividends) which was up on the 11.6 per cent return of the previous year. To put that in perspective, that was half the return of the US share market performance and 52nd out of 73 global markets followed by the Commsec research group.

So a good share market return – but not getting overvalued like other markets.

TAXES ARE LOW

Shock horror. But that’s a fact. The latest figures from the OECD show Australian income tax rates are below the average of other first-world industrialised countries and even below that of the US.

Now we acknowledge that there is much debate about the definition of what’s included in assessing income tax rates. Each country has its own system. For example, the US has state income taxes while a lot of European countries have extra social security taxes. We don’t have those extra layers but do have the Medicare levy and compulsory superannuation, and the states have payroll tax.

But using the OECD figures, which are regarded as the global benchmark, we are not overtaxed in comparison with the rest of the world.

JOB CREATION IS STRONG ... AND IMPRESSIVE

Unemployment dropped from 5.8 to 5.4 per cent last year and up until the end of November (the most recent figure) 383,000 new jobs had been created ... which is the best jobs growth in 12 years. Yes, the media headlines focused on the closure and redundancies at “old school” businesses like Holden and traditional retail stores but failed to recognise huge job creation in infrastructure and new age online businesses. Job advertisement figures are strong, which is a good lead indicator that this boom will continue and hopefully, lead to a pick-up in wages growth.

OUR PERSONAL DEBT IS BETTER THAN WE THINK

We’re going to be a bit controversial here because, on the face of it, Australian household debt is one of the highest in the world. It’s these raw figures which make the headlines and scare everyone.

But look at the breakdown and it shows Australians have never been savvier. The cost of money (interest rates) are low and we’re using it to our advantage by borrowing more “good” debt. Borrowing to invest in appreciating assets is regarded as good debt and bad debt is borrowing to consume.

Around 92 per cent of an Australian’s borrowings are good debt and just 8 per cent is bad debt. The average American, by comparison, holds 30 per cent in bad debt. And Australians have been using credit cards less. THE ECONOMY IS IMPROVING ... AND STILL A MIRACLE Well into our world recordbreaking 26th consecutive year of positive economic growth, the Australian economy has been underperforming its 2.7 per cent 10-year average.

But it started to pick up steam in the second half of the year so 2018 is expected to bring growth of 3-3.5 per cent.

Inflation is under control at 1.8 per cent, we’ve been chalking up record trade surpluses; commodity prices are strong; interest rates are low, business and consumer confidence has improved.