Last week's edition of The Economist featured Australia, with these words:
"Our cover this week holds out Australia as an example for the world. Rising incomes, low public debt, an affordable welfare state, popular support for mass immigration and a broad political consensus: in most of the rich world such blessings are a distant dream, in Australia they are a proud reality. The country has been growing for 27 years without a recession. The public finances are in excellent long-term shape. Half of Australians are either immigrants or the children of immigrants."
The article on "the most successful rich economy" is here. Does it feel so wonderful from this side of the planet? Surveys reveal 60% of Australians want cuts to immigration, we have the world's highest private debt to GDP ratio which the Reserve Bank has highlighted as a major risk, private sector wages have not risen for six years, and we've had five Prime Ministers since 2013. If we have a "broad political consensus", we make little progress on tax reform, climate change and power prices. Just today, UNICEF issued The Children's Report, showing one in six children in Australia live in poverty.
Stephen Grenville of the Lowy Institute says The Economist does not have a great track record on Australia. In 1995, four years into the 27 years of expansion and just after Mexico had experienced a currency collapse and deep recession requiring an IMF bailout, The Economist predicted: "Australia - the next Mexico".
Returning from overseas
On a brighter note, it's always good to come home and I've just returned from Europe. Italy is portrayed here as a basket case but it was vibrant and busy. Malta is booming, overrun with tourists. I've written a note on three points that struck me. BTW, topping up with €1,000 cash before the trip cost me $1,640 at money changer UAE Exchange, which at the same time would have cost $1,740 at CBA and a terrible $2,050 at the airport. How many people spend hours researching hotels and flights but little time on the best way to make the payment?
When playing tourist, it's easier to ignore the noise of the stock market. It seems to matter less that the S&P500, NASDAQ and S&P/ASX200 were all down around 10% from their peak. This must be how Warren Buffett feels when falls become buying opportunities.
Elsewhere in this week's edition ...
Roger Montgomery gives an excellent summary of the coming 5G networks and potential investment opportunities. For those nervous investors who have not been distracted by holidays and are worried about the market, Tim Fuller gives a simple guide to investing for the long term. Nicole Connolly explains the consistency of infrastructure assets and particularly airports.
The traditional relationship between US and Australian interest rates is currently reversed, and Stephen Cooper explains the ramifications. Douglas Isles laments the heavy focus advisers and their clients have on short-term performance and wants to change the conversation.
Leisa Bell summarises superannuation research from Mercer showing changing work conditions and disengagement by millennials, while at the other end of the age spectrum, Julie Steed explains how to access super when faced with a terminal illness.
The new Alliance for a Fairer Retirement System, established in response to Labor's franking proposal, held its inaugural summit this week, and a summary of discussions is here. Jon Kalkman of the Australian Investors Association, who has written many excellent pieces in Cuffelinks on this subject, is the main author of this comprehensive paper to the Standing Committee holding an inquiry into the policy.
Our updated White Papers from Perpetual Investments show how volatility can bring opportunities and what factors caused the recent sell-off, plus with a more local focus, the inaugural edition of the Quarterly Market Insights from the Perpetual Multi Asset team.
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Graham Hand, Managing Editor
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