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Link for this issue: http://tradingdiary.incrediblecharts.com/2017-09-11-economy.php
 

Australia; Housing bubbles and declining business investment

By Colin Twiggs
September 10, 2017 9:00 p.m. EDT (11:00 a.m. AEST)

Please note changes to the Disclaimer
Colin Twiggs is a director of The Patient Investor Pty Ltd, an Authorised Representative (no. 1256439) of MoneySherpa Pty Limited which holds Australian Financial Services Licence No. 451289.

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Australian Housing

The Australian housing bubble is alive and kicking, with house prices growing at close to 10% per year.

House Prices

Loan approvals are climbing, especially for owner-occupiers. Fueled by record low interest rates.

Loan Approvals

Causing household debt to soar relative to disposable income.

Loan Approvals

Business Investment

Nominal GDP growth of 6.34% for the 2017 FY is a rough measure of the average return on capital investment.

Australia Nominal GDP

With a mean of close to 5% over the last two decades, it is little wonder that business investment is falling. Not only in mining-related engineering but in machinery and equipment.

Australia Business Investment

Capital Misallocation

More capital is being allocated to housing than to business investment.

Australia Credit Growth

Returns on housing are largely speculative, premised on further house price growth, and do little to boost GDP growth and productivity.

The result of soaring house prices and household debt is therefore lower business investment and lower GDP and wages growth.

Australia Wages Growth

You don't have to be the sharpest tool in the shed to recognize that soaring household debt and shrinking wage growth is likely to end badly.



In the short run, the market is a voting machine
but in the long run it is a weighing machine.

~ Benjamin Graham: Security Analysis (1934)



 
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