Kohler report on the economy (7:30)

Alan Kohler has an in-depth report on the economy this week.

Doesn't seem to be biased one way or the other...just saying it like it is.

Worth a watch.
What is happening with the Australian economy?

 

Part 2
How Australia became the world record holder for debt

 

Part 3
Are retiring Baby Boomers making it harder for young people to get ahead?

 

"I don't think it is harder for young people to save for retirement and the reason is they have too many influences placed on them for disposable income expenditure which most of it is unnecessary - if they cut that out, they would end up exactly in the position I'm in." - Trevor Batten

Next minute he will be complaining generation Y crashed the economy (and his Super Fund), because no one is spending any disposable income!!

Maybe all Millenniums and Gen Y should band together and stop spending for a year or two. That will really put Australia into recession with 60% of GDP coming from household expenditure.

 

The constant talk about millennials wasting money is laughable when numerous studies have found they spend less of their income on luxuries than previous generations like baby boomers at the same age.

And the analysis isn't difficult. The cost of almost all the essentials (housing, medical care, education, electricity, gas, etc) have risen far quicker than wages with food being the only essential to buck that trend. If they're spending way more of their incomes in essentials how can they possibly be way more wasteful since their debt levels are actually lower than previous generations (far fewer own houses)? Also they pay more taxes due to the introduction of the GST.

So people point to holidays in Bali and avocado on toast like this is massive excessive spending when the reality is those things are WAY cheaper with respect to wages than they used to be (a holiday in Bali can cost comfortably less than a weeks median wage). In comparison they spend far less on things like alcohol (consumption is way down) and cigarettes (consumption is way, way down) which more than outweighs the other spending. Then things like uber are discussed like they're luxury spending when in reality it's often used instead of owning a car (ownership rates down over recent heaps decades) which saves heaps of money. Of course you can find seriously wasteful millennials but the statistics are clear that they're less wasteful than previous generations.

The "wasteful millennial" from all evidence is a complete fallacy.

 

I'd like to see someone challenge this position.

Also, Josephine claiming that Trevor worked 23/24hrs a day to afford their retirement. I'm gonna call her out on that little fib.

 

I had a chuckle when I heard that!

They were fortunate to finish school at 14 and 15 respectively and move straight into full-time employment. When unemployment was literally 1-2% in the rapid growth era that was achievable. Nowadays...

 

Certainly did. Even millennials say they are wasteful:

Millennials describe themselves as self-absorbed, wasteful

 

Always interesting to see what the mass media are saying. In general, by the time the media are doing articles like this, they're not describing the current conditions.

I think some points made are relevant: If there's a recession & jobs go, then housing will suffer a lot. The debt mix is geared towards the household sector in the Aussie economy (instead of the government or corporate sector). Means housing will suffer in Australia (NSW/VIC), given jobs are required to service debt and price levels require economic resilience to hold. Nonethless, talk of current recession is nonsense. While the video's don't suggest it, they skew the tone to this (fear sells!).

Overall though, IMO the winds are now beginning to blow in the other direction and the media are reporting old news today (at least in two major capitals).

Significant rate cuts, a pro-certainty government re-elected, house prices galloping, credit taps, infrastructure pipeline to go gangbusters, pro-migration...these are all likely precursors to stronger activity (e.g. in property industry specifically, developers will be building a lot in Sydney/Melbourne again soon enough and approval figures will follow). IMO its highly unlikely economic data that comes out over the next 12 months (which is reflecting the day to day today), will be as poor as the preceding 12 months. H12018 GDP data was pretty solid, and then slowed through FY2019.
I suspect the actions made by governments will turn a slightly slowing economy back to trend/above in a year or so (current conditions & data).

The RBA also seem on a mission to achieve some pretty solid goals and appear willing to do what it takes to get it done. Unemployment nationally sub 4.5%, growth, etc. Given their ammo to achieve this is interest rates, housing is going to shoot dramatically up if they really want to achieve this.

 

Always love your well thought out, glass half full posts @Redom

 

Me too. He's my favourite poster.

 

The fourth and final part in the series is now up...

What are the solution to Australia's economic woes?

 

Geez...a lot of this about China.... this is stupid policy to rely on just China. It is time to think India...and Indonesia as these will be in the top 6 economies by 2030.

I think the economists in this country ..including the RBA have not idea why we have low unemployment ..rising house prices but falling real wages and inflation...a couple of reasons why:

1. The Baby Boomers who were the engines of growth over the last 40 years are now retiring. Gen-X, Gen-Y and Z are not likely to fill this void in spending.
2. By 2025 over 40% of the jobs in Australia will be gig related. This will affect not only spending but also housing.
3. There is a massive transformation to the Digital Age. A lot of people have find they will need to have new skills and outlooks to get jobs.
4. China like Japan will go through a massive slow down in growth as their population rapidly ages. The engines for growth will be countries like India, Indonesia, Vietnam Phillipines, Nigeria....
5. The car industry will need to look at car subscription services to stay viable. Less and less people will but cars for their own personal use.
6. Jobs will be more flexible.....people who might have companies based on Sydney may work from places like the North Coast. This will have an impact on the Sydney house prices.
7. Properties with lifestyle benefits will be sought after.
8. The govt will be forced to make changes to Superannuation taxation draw downs (after generous thresholds) to ensure the budget balances and funds to support an ageing population are there.

So may take on this and the impact of Aussie market is:

1. Sydney and Melbourne will not see another massive boom. Sydney in particular will have a ceiling due to its price point.
2. Lifestyle areas close to Sydney and Melbourne will do very well as Baby Boomers seeks these sort of areas
3. Unemployment will remain lowish (under 6%) but wages growth will stagnate.
4. Brisbane/Perth will have strong growth over 2020 to 2025.
5. Some larger regional cities will have decent price growth.

 

@sash, sometimes you do make sense .

 

I am glad that I wan able to distill thid down for the masses....

 

This is my main investment thesis. Central coast for the win!

 

My partner and I are a Gen Y couple . We have have a few properties, 3 kids and work in virtual jobs we can do anywhere ! So I guess you could say we are what what the future is looking like. We live on the Gold Coast right near the beach because lifestyle and family time is important to us. We can work part time because we started our business from scratch and paid off our investment properties by making sacrifices and some good investment decisions. So not all millennials are lazy money wasters.

We do however want to have quality of life and meaningful jobs which if we bring back to property investing is why I would be buying in coast cities with gentrification going on. This why beachside GC is doing well millennials and baby boomers want to live here .So to coast near Sydney and Melb. So Sash makes good points .

 

Large job creators e.g. health, education, defence, infrastructure cannot be done remotely by the masses so I disagree. It may be a growing trend but the reality is only a small amount of the population will have the ability to work from anywhere on a full-time basis.

Your not an internet influencer perchance?

 

Haha yes reading back on my post it does sound like I’m a Gold Coast influencer. But our online business is a bit more boring . I also work in the public health system here casually as I enjoy it. The funny thing is you actually get paid quite a bit more in Qld public service than NSW and Vic. So the quality of life here for those working in hospitals, universities etc is great !

 

Employment numbers to be taken with a grain of salt as more part time workers are added into the employment rate. USA has a similar low wage growth but good employment and low rates but minimal gdp growth.

Do think we will be approaching a bad recession once China falters, trade war effect just tip of the iceberg. Already lithium prices crashing as chinese electric and auto sales continue their contraction. Once property and other asset bubbles pop over there we will be looking at Japan 2.0

Keep an eye on asx, if anything it will be the first to go and there goes all the super.