The good old days are now

Here is why we need to stop whinge­ing

The Daily Examiner - - LIFE FINANCES -

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.


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.


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.


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.


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.


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 sav vier. 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.


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.

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