Australia’s ongoing income recession

Livewire Exclusive

Livewire Markets

Investors and the media have a tendency to focus on real (inflation-adjusted) GDP growth, but after two decades of low inflation, Sam Ferraro, Founder of Evidente, says it’s nominal GDP we should be watching. Fund managers and analysts forecast nominal cashflows and households earn nominal wages, not inflation-adjusted wages. "It's more meaningful to focus on nominal GDP than real GDP." With the focus on real GDP, the income-recession in Australia in recent years has gone largely unnoticed. "I've been arguing for some time now that Australia has been going through an income recession. Nominal GDP has achieved average annual growth of less than 4% for almost 4-5 years now, which is without precedent." He says we’re moving out of sub-4% growth, into a period of 4-5% growth. This represents the long-term achievable growth rate for the Australian economy. Watch the video below to find out the implications for equity valuations and discount rates.


Livewire Exclusive
Livewire Markets

Livewire Exclusive brings you exclusive content from a wide range of leading fund managers and investment professionals.

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.

Comments

Sign In or Join Free to comment