Since when did talking down the Australian economy become the national pastime?
Whinging used to be something we accused others – okay, mainly the Poms – of doing. We were always better than that. What happened to 'she'll be right' and just getting on with things?
Sure, barbecue conversations about interest rates aren't new, and we've always had a distaste for the umpires and referees of our national sporting codes (I should know, I used to be a junior rugby league referee). And other than the rusted-on faithful, the rest of us took great delight in bagging Collingwood and Manly. That aside, Australians used to be an optimistic bunch with a positive, can-do approach.
It seems that a combination of international economic drama, a higher-than-usual Australian dollar and the politics of negativity are conspiring to turn us into a nation of whingers and pessimists.
The 'have a go' country has become the 'have a whinge' country. 'She'll be right' has become 'we'll be ruined' and taking responsibility seems to have been replaced with finding someone to blame.
But rather than compound it by whinging about the whingers, here's the optimist's manifesto:
Our economy is in good shape
According to the Australian Bureau of Statistics:
- Gross domestic product rose for the March quarter by 2.6% compared to the prior year
- Retail turnover for April grew by 3.2% over the past year, and 0.4% compared to March
- Building approvals rose by 6.3% in volume terms and 11.6% in value terms in April
- Inflation is smack bang in the middle of the RBA's target range at 2.5%
- The unemployment rate is at very low levels compared to recent history at 5.5%
- Lastly, the official cash rate set by the RBA is at an historic low of 2.75%, and the current crop of mortgage holders has likely never seen rates this low
Could things be better? Of course, but remember than an overheating economy is like the enjoyment of your eighth beer or glass of wine. You don't have a care in the world, but the hangover is going to be painful. You mightn't feel as wonderful after only your second drink, but you'll avoid the hangover.
The global economy is improving
The headlines usually (and appropriately) come out when something monumentally bad happens. Cue the Greek debt crisis, the Cypriot banking disaster and the US house price crash. These events are often sudden in their onset and severely dislocating in their effect – and newsworthy in the event. Less newsworthy, but as (if not more) important is the often under-reported, and much slower, recovery.
US housing starts are somewhere between 800,000 and 1 million per year (annualised), lagging the growth in household formation (translation: demand for houses has caught up to, and likely exceeds its supply, helping the recovery in house prices).
European growth is still sluggish, but much of the worst has likely passed. The OECD is expecting growth in the Euro area to be sluggish but still positive in 2013, with stronger growth next year.
There will be setbacks – the path of economic growth is never straight – but the long-term future is bright, as always.
History is on our side
Democratic capitalism is far from perfect. But, to appropriate a phrase used by Winston Churchill to describe our democratic system of government, it's the worst form of economic and political organisation except for all the others that have been tried.
It's the system that, according to index fund manager Vanguard, has turned a hypothetical $10,000 investment in Australian shares in 1982 into a touch short of $300,000 by midway through last year – a 30-fold return (and the S&P/ASX 200 is up another 20% since then).
In that three decade stretch, we've had a wages accord, eye-wateringly high interest rates, a handful of prime ministers, a couple of wars and other international deployments, terrorist attacks, the 1987 market crash and the recent GFC. The market grew 30-fold, not in the absence of potential trouble but despite the presence of same.
The envy of the world
I'm biased. I think we live in the greatest country on earth. Having travelled, lived and worked overseas, I have some basis (though not exactly a statistically reliable one) for thinking so. Every major developed country would swap economic places with Australia in an instant (and hey, they'd probably take our beaches and climate, too).
We truly are the envy of the developed world – but you wouldn't know that to read the headlines or in conversation much of the time.
Do we have a lot of work to do to become better? Absolutely – in a range of economic and social areas. Wanting to be better is a hallmark of a successful society.
But being better does not have to come from a place of completely undeserved pessimism. Indeed, coming from such a place only makes it harder.
It's natural for humans to treat the presence of – or even the potential for – bad news with caution. In an evolutionary sense, it kept us from harm. In our modern world, though, it becomes harmfully self-perpetuating.
But we need a dose of reality.
Foolish takeaway
We're not into trying to forecast the short-term future at The Motley Fool. It's notoriously difficult, if not impossible. But here are some forecasts I'm prepared to make:
Australians will be much richer, on average, in the future than we are today. The companies listed on the ASX will make more profit. Dividends will be higher. Democratic capitalism will remain the best – if still imperfect – system we have. We will be healthier, we'll live longer, and the technological improvements we will see in our lifetimes are unimaginable today.
If you knew that was going to be the case, wouldn't it change your outlook from one of pessimism to optimism? And wouldn't it cause you to ignore short-term market gyrations and instead keep your eyes firmly fixed on the horizon? Our national glass is well over half full. All that is required is that we open our eyes to see it – it's ours for the taking.
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Motley Fool advisor Scott Phillips does not own shares in any of the companies mentioned in this article.
