Australia, we have a (big) issue

Posted: April 24, 2015 in Uncategorized

I was reading a nice article from State Street (SPDR) that analyses the the relationship between commodities, real estates. Interestingly scary.

Some hard data from 1995 to 2015 (figures are averaged between commodities exporters Australia, Norway, New Zealand, Canada) (Unit Price base)

Salary up from 100 to 170

productivity from 100 to 136

Now just Australia

From 1999

House price from  138.7 to 356.2

Household debt from 100.3 to 163.2

Bank Assets from 100.5 to 168.5 (not so strangely similar…as the bank gave us the money to buy the houses).

The RBA in December 2014 said that the debt level is 250% of GDP.

So by December 54% of the assets we have are in housing, and 21% in Superannuation and just 6% in shares.

But gets worst…due to the “hunt for yield” – 65% of the equity assets are invested in high yield bank stocks (which invest in…real estate). And Super will be similar.

I do agree with SPDR – we sold a lot of things that were easy to pick from the ground and send it overseas. With the income we competed with each other (helped by negative gearing) to buy properties and not investing in productive things (so please do not complain re Ford and Holden leaving Australia – it is our fault in loving real estate.

So now we have no diversification (all in real estate) and a government that struggles to make hard decisions.

Enjoy the rally till you can!


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