Don’t look now – you are almost certainly poorer than a year ago
I am sorry to kick off the new year with some gloomy news of your finances.
It is never nice to discuss how much money you have lost, but if you are a home owner in Sydney, Melbourne, Perth or Darwin and if you have a superannuation nest egg, the odds are you are less wealthy today than you were a year or two ago.
Here are some uncomfortable facts.
The Australian stock market, where the bulk of your superannuation assets are likely to be invested, has slumped 11 per cent since August, reducing the value of stocks by around $200 billion. No doubt your superannuation has suffered part of this loss.
At the same time, home owners in Sydney, Melbourne, Perth and Darwin are seeing the value of their homes getting crunched.
Falling dollar reflects global concern all is not well in the Australian economy
The Australian dollar was hit hard overnight, Australian time, slumping below 70 US cents before a sharp and more extreme move saw it temporarily crash to a low of 67.40 US cents. It subsequently recovered marginally, but remains weak at around 69.40 US cents.
Rather than focus on the micro aspects of minute-by-minute or hour-by-hour moves in the dollar, which can be more noise than substance, the trend for the dollar over the past year has been down.
In January 2018, the Australian dollar was trading at 81.50 US cents.
There is increasing concern from global investors that all is not well with the Australian economy. Policy is in a do-nothing phase. Entrenched low wages growth is hampering growth in household spending. This is being complemented, in a negative way, by a sharp fall in wealth as house prices drop and the share market weakens, both of which will be a negative for the economy during 2019. This is because householders are simply not getting the income growth nor wealth accumulation needed to allow them to keep spending at a rate that will see the economy expand at a pace that will generate upside wage and inflation momentum. Strategies aimed at reducing debt and paring back new borrowings mean, by definition, weaker economic growth over the near term.