Wasting Time Waiting for the 'Wealth Effect' to Work Wonders

Jordan Eliseo

The Perth Mint

Just shy of 80% of the net worth of everyday Australians is trapped inside owner occupied housing and superannuation. That is the finding's of a Roy Morgan survey which spoke to over 250,000 Australian's. This is why the 'wealth effect' isn't working - at least for those expecting it to translate to higher consumer confidence, spending - and ultimately, employment and business investment. Very simply - Australian's can't spend it, and with the savings rate effectively zero once compulsory superannuation contributions is accounted for, they have little in the way of free cash flow. Indeed a recent ME Bank survey indicated over half the country can't save a dollar month to month. The only way the Aussie consumers will be able to spend more is if they - get a pay rise - use their credit cards more On this score - there's no good news, with real wage growth effectively negative, whilst the latest ABA report stated that; "the balance accruing interest for credit card customers has been in decline for the past three years." More detail here (VIEW LINK)

Gold bull since early 2000. Have spent +20yrs working in investment analytics, research & portfolio construction. Author of two books on investing in gold and the causes of the GFC. Lover of markets, competition & technology

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