I have long been under the impression that the bastions of capitalism have outperformed the far flung and small-scale dominions, but new research reported in today's Australian Financial Review suggests that the place to put your money over the long term is here in Australia. The long term is the last 110 years from the start of the twentieth century, a period taking in the great depression, two world wars and sundry other jolts to long-run economic performance like the GFC.
After adjusting for inflation and currency movements, Australian stock markets returned an average 7.5% per annum compound for that 110 year period, just slightly ahead of South Africa! That was over 2% per annum faster than the UK, and 1.6% ahead of the US. Perhaps having a resource economy rather than relying on manufacturing is the key to this performance. Note that Italy, one of the PIIGS, only managed 1% and even France and Germany managed only 2%. The graph accompanies this post.
By the way, I saw some forecasts today for currency movements, with the Australian dollar possibly reaching US$1.50 in 5 years compared with the current 91 US cents, and maybe > 1 Euro and almost 1 GBP. In a way that's scary for agricultural exporters and due solely to the current minerals and energy boom linked into China and the rest of south and southeast Asia. Meanwhile the population boom continues apace despite the GFC and population expanded at about 2% last year. Even the domestic birth has been propelled upwards close to replacement rate (2.1 live births per 1000 women of child-bearing age). No wonder consumer and business sentiment is back to pre-GFC levels and the Reserve Bank is ratcheting up interest rates towards previous levels. It's business as usual.
AS
2 comments:
I wish that we had such a strong economy in the UK but Gordon Brown sold the family silver cheap (actually most of the gold reserves), saved none of the oil revenues and has incurred enormous debt that may take generations to pay off. And he wants to be re-elected! The funny thing is that the people are just about daft enough to re-elect him and his merry band of losers. Richard.
It's interesting that our two political systems are so different. Rudd has made some mistakes, but is likely to win our late 2010 election comfortably with a strong economy. Labor's associates in the UK built a house of cards and it has collapsed.
However, politicians seem to be as good as their advisors and key institutions and I have to say that Australia's Reserve Bank has performed brilliantly for the last 25 years, ably assisted by the Productivity Commission, Treasury, and prudential regulators. These arms of government have hardly put a fott wrong and both the ALP and the Coalition (Conservative) parties have trod the same path of economic rectitude.
AS
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