Australia | Mar 22 2010
By Greg Peel
“Australians have never had it so good,” suggests CommSec's ubiquitous chief economist Craig James, but he is also quick to qualify with “that is probably a big call and one that would attract a lot of discussion”.
We are only one year on from the beginning of the recovery from the worst global financial crisis since, in theory, the Great Depression. And while it is fair to say in retrospect that the 2007-08 downturn in Australia did not ultimately hit as hard as the 1991-92 recession, there are still plenty of Australians coping with having lost perhaps half their investment savings, struggling with mortgage delinquency, and if not out of a job still working restricted hours for less pay.
Yet CommSec's new gauge of economic performance, called the National Performance Gauge, has hit a record high. Given the words “new” and “record” are used in the same sentence, and that a chart is provided back to 1987, one assumes CommSec has recently created the gauge but then applied it retrospectively.
Economic data releases show that Australia's economy out-performed the rest of the developed world in 2009. This might be all well and good if you are a large corporate like BHP, but how have average Australians fared? To assess performance CommSec has measured not only economic growth and spending levels, but also unemployment, consumer confidence, and measures of purchasing power for the staples of mortgage, car and petrol.
The National Performance Gauge rose by 4% in 2009 and has risen 10% since the GFC trough in 2008. As the graph above shows, not only is this performance impressive in its own right, but the gauge has now significantly exceeded its previous high in mid-2007 which was just before all hell broke loose.
Clearly many Australians took a wealth hit given the share market performance from that time, but a combination of government stimulus, record immigration and a lack of new housing development has meant average house prices only suffered a brief stumble before resuming their giddy trajectory. CommSec has also created the National Performance Gauge Plus to add in property and share ownership, and that index hit a record high in the December quarter. It is up 8% over the past year and up 42% in a decade. By contrast, the standard gauge (not counting property and shares) is up 10% in a decade.
So clearly it has paid over time to own a house or two and be invested in shares. But in the wider cohort, income per capita is up 6% over five years and retail spending up 7%. Today it takes 30 weeks of average wages to buy a new Falcon, down from 36 weeks five years ago and the most affordable level in 35 years. It takes 1.58 weeks of average wages to make one average mortgage payment, which despite “unaffordability” cries is the same level of five years ago. And despite rising oil prices, drivers can afford 7% more petrol from the average wage than five years ago.
Looking at the longer term numbers, the National Performance Gauge has risen 36.6% over 23 years of data or 1.6% per annum. This may not seem like a lot, but James points out there's no reason for prosperity to always grow over time. It certainly hasn't in other economies.
And James goes on to suggest that this measure of “material well-being” does not tell the whole story of life in Australia. Perhaps if measures were included for things like hospital waiting times, commuter travel times and the proportion of Australians in higher education then a different picture of comparative well being may emerge. But throw in technological advances and take-up in computers, the internet, mobile phones and car safety advances and further debates could be held.
The good news for investors, CommSec concludes, is that a growing economy begets higher house and share prices. A drag on further performance will come from rising interest rates and reduced housing affordability which will impact on confidence. And we must not dismiss the risks still existing in Europe, the US, and even China in the wider scheme of things.
But in the meantime, over to you Dicky Clap:
“We're doin' fine in the Lucky Country; doin' alright coz we're makin' money; down in the Lucky Country” (a hit in 1977).