Invast Blog

Australia among best economies in the developed world

Every now and then traders and investors must step back and face the facts. Australia’s amazing economic run has continued, despite all the negativity and fear. We’re not only growing our economy, but at a very desirable rate.

This month’s GDP reading and the recent decline in unemployment to 5.8% means we are now one of the most desirable economies in the developed world. There might be countries growing at a slightly higher rate, but one needs to keep in mind that we didn’t have a recession. We are coming of an already high base and we have absolutely amazed many investors around the world who thought our economy would crumble under a slowing China.

Let’s put the Aussie growth story in context, using facts:

  • We’re still AAA rated despite fiscal pressure, which seems to be managed.
  • Our unemployment rate is declining and didn’t touch anywhere near the 6.5% feared.
  • Our GDP growth rate is still healthy growing at an annualised rate of 3%.
  • Our housing market has slowed slightly, but demand remains strong with auction clearance rates back above 70% in Sydney and Melbourne. The national average is comfortable in the mid 60% range.

We haven’t had a housing collapse, we didn’t have an economic collapse and we definitely did not see a jobs crisis in this country. On every single fearful measure, we have performed in the opposite direction. There will always be bears out there that hold onto their hats and caution that this will come. The smart money is betting otherwise – bonds are being sold, yields are rising and the currency is pointing higher. Not even the RBA is willing to jawbone because it knows that credibility is important – it cannot dispute the very strong numbers being reported.

The only problem is the stock market. You could be confused for reading the above and thinking this is great news for Aussie stocks. That is probably a little too premature. Unfortunately, the Australian stock market does not represent the overall economy as well as other developed countries. Our market is dominated by a handful of stocks – the banks, the resource stocks and some large and boring industrial companies. Banks don’t do well when rates rise and our resource companies are very heavily exposures to two key commodities – iron ore and energy – which can remain at depressed levels while the economy ticks along.

We need a reality check on the Australian stock exchange. We need to attract listing like Atlassian which started in Sydney, grew into a global firm and then chose to list in the US markets. Very unfortunate, but completely understandable.

Our focus at Invast has been in solving this problem for many domestic investors. That is why we have a DMA CFD offering that covers multiple global exchanges with a huge offering in each market. That is why we have built a thematic investing platform called PortfolioInvestor that takes broad global themes – like Driverless Cars – and allows domestic investors to invest in this theme where we pick and manage the underlying CFD holdings.

Great news for the Australian economy, now it’s time to invest around this and put this rising Aussie dollar to good use.

Remember, Invast clients get a higher level of research and analysis, including weekly trading calls written by myself and other members of our investment committee. I invite you to get access to these by joining as a client. You can self-navigate through our simplified account opening process here.

 

Happy investing,

Peter Esho

Chief Market Analyst

 

Peter Esho is a member of Invast’s Investment Committee and Chief Market Analyst at Invast Financial Services in Australia.   The Invast’s Investment Committee constructs professionally constructed global thematic portfolios of Direct Market Access (DMA) CFDs over highly liquid global shares and ETFs through its new PortfolioInvestor platform. Since 1960, the Invast Group has grown to become one of the largest and most successful global brokerage firms, offering state-of-the-art trading technology and unparalleled service catering to all levels of traders.

Invast Financial Services Pty Ltd (ABN 48 162 400 035) is regulated by the Australian Securities and Investments Commission and holds an AFS Licence 438283 which authorises it to carry on a financial services business in Australia.

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