raise your expectations Australia!!!
- Thread starter NigelW
- Start date
GeoffW wrote:
'I've heard it said that the reason that Spain became so poor, in comparison the the rest of Europe, is the vast amount of gold they received from the New World.'
'The very well off became the idle rich- and bought carpets from Belgium, furniture from France- or whatever mix of goods it was. The people in the countries Spain bought from became rich as they learnt to make things of value to other people. And the people of Spain did not learn such skills.'
I've just had a dark thought.
If we modified that quote to read '... the reason Australia became poorer in comparison with other OECD countries over the last 100 years, is the vast amount of property they sold to one another' would it have some truth here?
It seems to me that national wealth is similar to principles of individual wealth. Australia must earn more than it spends and invest the surplus productively. 'productive' in this case means something that has long-term benefits rather than short-term consumption.
Sure one person can improve their position relative to one another if they do up houses, sell them and make a capital gain. Someone else pays a higher price, but this can be justified through the risk that the renovator has taken. Also making an uninhabitable house liveable can be regarded as a social good. This is particularly if it's in an established suburb as it reduces sprawl on the outskirts. There's also the social good in providing rental housing (especially if our property investing is towards the affordable end of the market).
If I save, borrow, buy houses and collect rents, I will probably end up wealthier than some other person who spends and borrows on depreciating consumer goods. I might even be able to retire earlier, give someone else my job so help reduce unemployment.
But a country can't get rich if we all sold property to each other, even though some individuals within it can.
Is Australia heading down the same path that the Spanish did, especially given current talk about property being a key route to wealth?
Of course GDP as a measure has problems. Though it is often used as a crude measure of national wellbeing, it does not measure environmental or social outcomes. Also if we do each others washing (and pay for it) our GDP goes up as we're transferring activities from non-tradeable/DIY to the cash economy. But overall living standards have either not changed, or declined slightly due to some new costs.
Regards, Peter
'I've heard it said that the reason that Spain became so poor, in comparison the the rest of Europe, is the vast amount of gold they received from the New World.'
'The very well off became the idle rich- and bought carpets from Belgium, furniture from France- or whatever mix of goods it was. The people in the countries Spain bought from became rich as they learnt to make things of value to other people. And the people of Spain did not learn such skills.'
I've just had a dark thought.
If we modified that quote to read '... the reason Australia became poorer in comparison with other OECD countries over the last 100 years, is the vast amount of property they sold to one another' would it have some truth here?
It seems to me that national wealth is similar to principles of individual wealth. Australia must earn more than it spends and invest the surplus productively. 'productive' in this case means something that has long-term benefits rather than short-term consumption.
Sure one person can improve their position relative to one another if they do up houses, sell them and make a capital gain. Someone else pays a higher price, but this can be justified through the risk that the renovator has taken. Also making an uninhabitable house liveable can be regarded as a social good. This is particularly if it's in an established suburb as it reduces sprawl on the outskirts. There's also the social good in providing rental housing (especially if our property investing is towards the affordable end of the market).
If I save, borrow, buy houses and collect rents, I will probably end up wealthier than some other person who spends and borrows on depreciating consumer goods. I might even be able to retire earlier, give someone else my job so help reduce unemployment.
But a country can't get rich if we all sold property to each other, even though some individuals within it can.
Is Australia heading down the same path that the Spanish did, especially given current talk about property being a key route to wealth?
Of course GDP as a measure has problems. Though it is often used as a crude measure of national wellbeing, it does not measure environmental or social outcomes. Also if we do each others washing (and pay for it) our GDP goes up as we're transferring activities from non-tradeable/DIY to the cash economy. But overall living standards have either not changed, or declined slightly due to some new costs.
Regards, Peter
Acey wrote:
'Property is only one asset class & is a globally relevant one.
Thus far no country has become poor through selling & buying it's own land.'
My main concern is if a country with a low savings rate and a bad balance of trade has a domestic property boom. (I'm thinking of a late 1980s scenario here)
Every man and his dog borrows money and gets into the property market. Thus debt levels increase, but that's OK for a while because of the capital growth.
The building industry becomes overheated with many off the plan projects. This leads to inflation. Concern about inflation causes interest rates to go up (though this did not happen in the 1970s where real interest rates were negative at one point).
With higher interest rates we become a more attractive destination for overseas investors. With more foreign investors wanting our currency, its value rises. The property boom might also be given another spurt by offshore investors.
A strong dollar makes our exports less competitive, but imports cheaper. This may put downward pressure on inflation (cheaper imports) but our trade deficit increases.
After a couple of years of things going 'gangbusters' (to quote Paul Keating) people discover that the yields are pitifully low and are well below the interest rates they're paying. People panic and sell up. If they're unlucky some investors will have negative equity and there's a crash in some areas for some types of property. Overseas investors might even pull out.
Now back to Acey's point.
Let's say that the property boom was to continue and yields drop to 1-2%. Now you can get more than that with a risk-free term deposit (even allowing for the extra taxes you'd pay).
Is this globally relevant when you can get higher returns elsewhere? I doubt it. Especially when it's not competitive with other investments.
Whereas a property investment earning 5-15 % and with growth prospects (ie long-term underlying need and not overpriced) is competitive with other investments, both here and overseas.
I agree that Australian property can be a globally relevant asset class.
But doesn't it lose its relevance if it becomes overpriced to such an extent that returns from it are lower than comparable risk investments elsewhere? And freed from the discipline of rental reality, it becomes our version of tulips for a while.
Also property value may be related to the relative economic position of Australia in the world, which depends on the underlying growth of our real economy. World Cities like NY, London and Sydney seem to have the highest property values. If a city is not a world city or has lost prestige through economic decline, its value is lower, eg Melbourne in the early 90s.
I worry that if property takes up a too greater share of investment finance and we buy and sell to each other at higher and higher prices, there is a risk that we might neglect other industries, particularly those that generate export income, and finance becomes harder to get for the creative/innovative/export sectors.
Onto the second point about countries not becoming poor when trading their own property.
Though Japan did not suddenly become poor as a result of its late 1980s property bubble, its economic growth has been sicky in the years since.
Regards, Peter
'Property is only one asset class & is a globally relevant one.
Thus far no country has become poor through selling & buying it's own land.'
My main concern is if a country with a low savings rate and a bad balance of trade has a domestic property boom. (I'm thinking of a late 1980s scenario here)
Every man and his dog borrows money and gets into the property market. Thus debt levels increase, but that's OK for a while because of the capital growth.
The building industry becomes overheated with many off the plan projects. This leads to inflation. Concern about inflation causes interest rates to go up (though this did not happen in the 1970s where real interest rates were negative at one point).
With higher interest rates we become a more attractive destination for overseas investors. With more foreign investors wanting our currency, its value rises. The property boom might also be given another spurt by offshore investors.
A strong dollar makes our exports less competitive, but imports cheaper. This may put downward pressure on inflation (cheaper imports) but our trade deficit increases.
After a couple of years of things going 'gangbusters' (to quote Paul Keating) people discover that the yields are pitifully low and are well below the interest rates they're paying. People panic and sell up. If they're unlucky some investors will have negative equity and there's a crash in some areas for some types of property. Overseas investors might even pull out.
Now back to Acey's point.
Let's say that the property boom was to continue and yields drop to 1-2%. Now you can get more than that with a risk-free term deposit (even allowing for the extra taxes you'd pay).
Is this globally relevant when you can get higher returns elsewhere? I doubt it. Especially when it's not competitive with other investments.
Whereas a property investment earning 5-15 % and with growth prospects (ie long-term underlying need and not overpriced) is competitive with other investments, both here and overseas.
I agree that Australian property can be a globally relevant asset class.
But doesn't it lose its relevance if it becomes overpriced to such an extent that returns from it are lower than comparable risk investments elsewhere? And freed from the discipline of rental reality, it becomes our version of tulips for a while.
Also property value may be related to the relative economic position of Australia in the world, which depends on the underlying growth of our real economy. World Cities like NY, London and Sydney seem to have the highest property values. If a city is not a world city or has lost prestige through economic decline, its value is lower, eg Melbourne in the early 90s.
I worry that if property takes up a too greater share of investment finance and we buy and sell to each other at higher and higher prices, there is a risk that we might neglect other industries, particularly those that generate export income, and finance becomes harder to get for the creative/innovative/export sectors.
Onto the second point about countries not becoming poor when trading their own property.
Though Japan did not suddenly become poor as a result of its late 1980s property bubble, its economic growth has been sicky in the years since.
Regards, Peter
Riase Your Expectations, Australia
Dear Peter,
1. To me, Australia is a much blessed country today. It is endowed with tremendous natural resources and blessed with a good, able and pragmatic government, that a lot of international monies and talented/middle-class people from around the world are flowing into Australia to become its citizens. It's just like free monies/wealth "blessings" dropping down from Heaven. What esle do you want to expect further?
Being rich is relative. Over this one year in 2003, the Australian $ currency have risen more than 30% vis-avis- the Singapore $currency. If your Australian economy is not strong (vis-a-vis the rest of the world), do you think that your Australian $ currency can really appreciate so much as compared to the other currencies, if its economy is really not good vis-a-vis the rest of the world and as a result of your country's good goverence?
As I understand that Australia does in fact, produce and export many of its goods and services internationally to the rest of the world. Thus, honestly spekaing, I really do not understand your real concerns about its current growing economy and prosperity. Do you care to elaborate your real concerns here so that we may learn from you.
However, if Australia's prosperity does in fact only comes about as a result of its people's own buying and selling houses to support its economy, as you seems to suggest, the present prosperity will not last long over time, as we have seen in Japan and Singapore, where property prices has dropped by more than 40% and 80% off its last peak values in 1996 and 1991s respectively.
Regards,
Kenkoh2000
Dear Peter,
1. To me, Australia is a much blessed country today. It is endowed with tremendous natural resources and blessed with a good, able and pragmatic government, that a lot of international monies and talented/middle-class people from around the world are flowing into Australia to become its citizens. It's just like free monies/wealth "blessings" dropping down from Heaven. What esle do you want to expect further?
Being rich is relative. Over this one year in 2003, the Australian $ currency have risen more than 30% vis-avis- the Singapore $currency. If your Australian economy is not strong (vis-a-vis the rest of the world), do you think that your Australian $ currency can really appreciate so much as compared to the other currencies, if its economy is really not good vis-a-vis the rest of the world and as a result of your country's good goverence?
As I understand that Australia does in fact, produce and export many of its goods and services internationally to the rest of the world. Thus, honestly spekaing, I really do not understand your real concerns about its current growing economy and prosperity. Do you care to elaborate your real concerns here so that we may learn from you.
However, if Australia's prosperity does in fact only comes about as a result of its people's own buying and selling houses to support its economy, as you seems to suggest, the present prosperity will not last long over time, as we have seen in Japan and Singapore, where property prices has dropped by more than 40% and 80% off its last peak values in 1996 and 1991s respectively.
Regards,
Kenkoh2000
Hi Kenkoh
Though relative to the rest of the world the Australian economy is doing better now than at any time in the last 30 years, I do have concerns about our long-term prosperity.
These are based on:
1. Though our living standards are still high, we have slipped from being in the top 3 to in the top 20 countries in the last 100 years
2. Our export base contains a large proportion of primary produce compared to other first-world countries. The relative value of this has tended to drop over time, reducing the terms of trade.
3. Despite recent rises, the value of our currency has declined in the longer term relative to world currences. For instance in the 1970s $1 AU > $1US. Though this gives respite for exporters, it means that we can afford less in the world, and our economy represents a shrinking proportion of the world total GDP.
4. Though there are small specialised technology companies that are world class we are not home to large companies in fast growing industries like pharmaceuticals.
5. Though we are early adopters of consumer goods, we are lagging in some important areas, eg access to broadband in residential areas.
6. Barry Jones & John Button mentioned the low amount of private sector R&D compared to other countries. I'm not sure if that's still the case.
7. Our rate of personal savings is low and we have not provided for superannuation sufficiently. Offsetting this is that our population is younger than Europe's.
Regards, Peter
Though relative to the rest of the world the Australian economy is doing better now than at any time in the last 30 years, I do have concerns about our long-term prosperity.
These are based on:
1. Though our living standards are still high, we have slipped from being in the top 3 to in the top 20 countries in the last 100 years
2. Our export base contains a large proportion of primary produce compared to other first-world countries. The relative value of this has tended to drop over time, reducing the terms of trade.
3. Despite recent rises, the value of our currency has declined in the longer term relative to world currences. For instance in the 1970s $1 AU > $1US. Though this gives respite for exporters, it means that we can afford less in the world, and our economy represents a shrinking proportion of the world total GDP.
4. Though there are small specialised technology companies that are world class we are not home to large companies in fast growing industries like pharmaceuticals.
5. Though we are early adopters of consumer goods, we are lagging in some important areas, eg access to broadband in residential areas.
6. Barry Jones & John Button mentioned the low amount of private sector R&D compared to other countries. I'm not sure if that's still the case.
7. Our rate of personal savings is low and we have not provided for superannuation sufficiently. Offsetting this is that our population is younger than Europe's.
Regards, Peter
Spiderman,
You need to do some research on economics, your point on property is totally unrealistic. More than 50% of the world's wealth is held in property and if your point had validity Australia would not be the first country going bankrupt
Some specific responses to your points below.
Firstly the measurements have changed. You cannot compare the measurements of 100 years ago with today. Certainly being no.1 100 years ago wouldn't get you in the top 50 today!
Secondly other countries have improved their living standards faster than Australia has increased ours,coming off a lower base this isn't surprising. So other places may be considered to have higher living standards - but who really cares! I'd be happy to be LAST in the ranking provided our living standards were as good as they are today
Very true. But we are also one of the most efficient primary producers in the world. As the world population climbs & arable land declines where will countries that are not self-sufficient in food have to go to feed their people? In the LONG term being a major primary producer/exporter & being self-sufficient in food stuffs is a MAJOR benefit!!!
There are several answers to this point. Firstly we have floated our economy such that it is not tied to the gold standard or to other currencies. This means that the value of our currency is now set by the market rather than a few economists....has our dollar declined in real value? Hard to say - was our dollar unrealistically valued in the 1970s - definitely YES! And it caused us no end of export grief!
And do large companies in fast growing industries bring that much wealth to the countries they start in?
Most major corporations today are global citizens....governments are still catching up, but really having home-grown mega-corporations is not necessarily an advantage. It's more important in the 21st century to have centres of excellence - networks of small organisations each the best in their field. Australia is a leader in this new form of thinking.
Remember large companies are not even a two century old phenomenon, their long-term survival and value is not yet proven Small businesses have a much longer & successful track record....knowledge workers at home with a broadband connection & video phone, what more is needed!
A short-term inequality in the market. Look at our adoption of mobile phone technology, internet access or PCs instead - we're one of the most connected and communicating countries in the world. Broadband is about speed of connection, not efficiency of communication & as yet has not proven to offer significant consumer advantages in ANY jurisdictions - so slow adoption does not seriously impact on our competitiveness. Find me the broadband killer app & I'll change my mind
It's still the case. However for patents per head of population Australia still does remarkably well & our research institutions are world class. We do a lot with a little or you could say we deliver better returns per R&D dollar than any other country in the world!
It will all come out in the wash. Watch Italy's population - on a downward spiral. Refer to my post on the average age of people globally today (more than 50% under the age of 30). There are plenty of young ambitious people waiting to come to Australia for opportunities. There will be no problem in funding retirees provided we constantly modify our immigration policy. Wait and see, when the crunch hits we WILL import people from 3rd world countries & train them up - sure it changes our demographic make-up, but that's hardly the first time
Look at a newspaper of 100 years ago & all the insolvable issues they faced - now all solved.
Nothing has changed.
Cheers,
Aceyducey
You need to do some research on economics, your point on property is totally unrealistic. More than 50% of the world's wealth is held in property and if your point had validity Australia would not be the first country going bankrupt
Some specific responses to your points below.
Firstly the measurements have changed. You cannot compare the measurements of 100 years ago with today. Certainly being no.1 100 years ago wouldn't get you in the top 50 today!
Secondly other countries have improved their living standards faster than Australia has increased ours,coming off a lower base this isn't surprising. So other places may be considered to have higher living standards - but who really cares! I'd be happy to be LAST in the ranking provided our living standards were as good as they are today
Very true. But we are also one of the most efficient primary producers in the world. As the world population climbs & arable land declines where will countries that are not self-sufficient in food have to go to feed their people? In the LONG term being a major primary producer/exporter & being self-sufficient in food stuffs is a MAJOR benefit!!!
There are several answers to this point. Firstly we have floated our economy such that it is not tied to the gold standard or to other currencies. This means that the value of our currency is now set by the market rather than a few economists....has our dollar declined in real value? Hard to say - was our dollar unrealistically valued in the 1970s - definitely YES! And it caused us no end of export grief!
And do large companies in fast growing industries bring that much wealth to the countries they start in?
Most major corporations today are global citizens....governments are still catching up, but really having home-grown mega-corporations is not necessarily an advantage. It's more important in the 21st century to have centres of excellence - networks of small organisations each the best in their field. Australia is a leader in this new form of thinking.
Remember large companies are not even a two century old phenomenon, their long-term survival and value is not yet proven
Small businesses have a much longer & successful track record....knowledge workers at home with a broadband connection & video phone, what more is needed!A short-term inequality in the market. Look at our adoption of mobile phone technology, internet access or PCs instead - we're one of the most connected and communicating countries in the world. Broadband is about speed of connection, not efficiency of communication & as yet has not proven to offer significant consumer advantages in ANY jurisdictions - so slow adoption does not seriously impact on our competitiveness. Find me the broadband killer app & I'll change my mind
It's still the case. However for patents per head of population Australia still does remarkably well & our research institutions are world class. We do a lot with a little or you could say we deliver better returns per R&D dollar than any other country in the world!
It will all come out in the wash. Watch Italy's population - on a downward spiral. Refer to my post on the average age of people globally today (more than 50% under the age of 30). There are plenty of young ambitious people waiting to come to Australia for opportunities. There will be no problem in funding retirees provided we constantly modify our immigration policy. Wait and see, when the crunch hits we WILL import people from 3rd world countries & train them up - sure it changes our demographic make-up, but that's hardly the first time
Look at a newspaper of 100 years ago & all the insolvable issues they faced - now all solved.
Nothing has changed.
Cheers,
Aceyducey
This is a VERY interesting topic. I disagree with you Acey on the foodstuffs independance point. In the industrial age the theory of economics being the competition for limit resources was correct, however I beleive in the information age wealth is only limited to information/current technology and the morse law states information double (i think) every 2 years. Theres a book which theory i agree with (cant remember what its called) which says that wealth in the information is stored in information/technology as opposed to land (agrerian age), factories (industrial age). With technology we will find more efficient ways to produce food stuff and bypass/limit our current dependance on resources such as oil and precious metals.
Expectations
Remember,
If you aim for the stars, you may at least hit the moon.
JIM
Remember,
If you aim for the stars, you may at least hit the moon.
JIM
To pull two threads together....namely this one & the
'How much income do YOU need to feel wealthy?' poll(http://www.somersoft.com/forums/showthread.php?s=&threadid=12799)
Forumites have thus far said on average that they see a income of about $200,000 per annum AFTER-TAX would make them feel rich - or roughly double the average BEFORE-TAX $100,000 income for the average Queenslander.
This was calculated by taking the highest figure in each band of the poll above & treating the $150K plus crowd as aiming for $300K per year.
Using a higher assumption for this top option would only push the figure higher.
So in conclusion - forumites have set a much higher wealth bar than the average Australian!
And by being here are certainly doing something to achieve it as well
Cheers,
Aceyducey
PS: Jimmy that's my saying!
'How much income do YOU need to feel wealthy?' poll(http://www.somersoft.com/forums/showthread.php?s=&threadid=12799)
Forumites have thus far said on average that they see a income of about $200,000 per annum AFTER-TAX would make them feel rich - or roughly double the average BEFORE-TAX $100,000 income for the average Queenslander.
This was calculated by taking the highest figure in each band of the poll above & treating the $150K plus crowd as aiming for $300K per year.
Using a higher assumption for this top option would only push the figure higher.
So in conclusion - forumites have set a much higher wealth bar than the average Australian!
And by being here are certainly doing something to achieve it as well
Cheers,
Aceyducey
PS: Jimmy that's my saying!
