There’s a piece today by Peter Martin and Phillip Wen in the Fairfax press about how:
Australians are richer than ever, paying off debt at an unprecedented rate – but still losing confidence in the economy.
New figures show wealth per person climbed to a record high of $266,600 at the end of December, easily eclipsing the peak of about $255,000 reached before the global financial crisis. Unadjusted for inflation the typical Australian has recovered all of the wealth lost in the crisis, and in the year to December climbed a further $13,000 a head.
The Treasury and Bureau of Statistics figures cover wealth held in accounts, shares and property. Private sector wealth amounts to $6 trillion, double what it did 10 years ago. Wealth per household is approaching $700,000.
Total borrowing by individuals and corporations is down 11 per cent over the year, the biggest slide on record.
The CommSec economist Craig James, who prepared the per capita figures for the Herald, says the nation seems focused on perceptions rather than reality. A separate Westpac Melbourne Institute survey shows consumer confidence down 9 per cent over the year. Optimism about family finances is down 11 per cent and optimism about the wider economy is down 14 per cent. Only when asked about whether now is a good time to buy a major household item is there some optimism, with the index up 4.5 per cent as the high dollar and low demand make prices more competitive.
So, by extension, Australians are acting irrationally by saving. Is this willful ignorance? The RBA has made it abundantly clear that it welcomes this saving. Moreover, that the era of debt-binging for consumption and housing is over. Australia’s growth model has shifted to resources investment. On top of the close shave we had in the GFC, this has entrenched a laudable new savings culture.
Also, as I noted yesterday, the RBA has explicitly nominated the measure of a good time to buy a large household item as central to its growth expectations and by extension interest rates. If Australians go buying, their mortgages will rise. This chain of logic is not that complex.
I can only ask, what ever happened to the economic idea that saving is good? That it funds investment? That it prevents a blowout in the current account deficit? Isn’t that why we installed a GST?
Back to the article:
Emily Ferrier, 20, and Maddy Brooks, 19, were ready to buy while out shopping in Pitt Street Mall yesterday, but not keen to break the bank. ”A lot of banks have tried to send me credit card applications and I’ve just had to tear them up because I don’t trust myself,” said Ms Ferrier, whose last big purchase was a widescreen TV.
”It’s all about the deals they give you,” said Ms Brooks.
Around 60 per cent of the shoppers surveyed by Westpac say now is the right time for a major purchase – a figure little changed over the past 10 months and well up from 50 per cent before the dollar began climbing.
Unusually, consumers away from the metropolitan areas feel more optimistic than those in cities such as Sydney, Newcastle and Wollongong.
“It’s probably due to rising prices for beef, wheat, lamb and cotton and heavy rainfall,” said the Westpac chief economist, Bill Evans.
And it’s because city-dwellers’ houses are losing value and they’re awake to the fact that it will likely continue (in real terms at least). A truth also confirmed in yesterday’s Westpac survey but conveniently ignored here.
Yes, Australia is getting richer. But this time it’s real wealth, not phony baloney wealth via asset inflation fed by the banks’ offshore borrowing. When you actually earn your savings, you start to value them.
These journalists should stop looking down on Australians for doing the right thing. It is they that are acting irrationally, promoting an extinct growth model, not the population. They need new sources.
