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The total wealth of Australians has dropped by close to $300 billion since the start of 2018.
How much of that is yours?
The fall in house prices and now the slump in the stock market is undermining the wealth of Australian householders.
This is an important trend given the solid link between the change in wealth and household spending. Numerous studies show that when wealth increases, growth in household spending is faster than it would otherwise be. It appears that householders view their extra wealth in a manner that sees them lower their other savings or use that wealth as collateral for additional borrowing fund extra consumption. They may even ‘cash in’ their extra wealth and use those gains to fund additional spending.
When they observe falling wealth, experience weak wages growth and realise their savings rates are perilously low, they will adjust their spending – down.
The extraordinary vote in the Wentworth by election, with the 18 or 19 per cent swing against the Liberal Party, presents further evidence that the Morrison government is set to lose the next general election.
There is nothing particularly new in this with the major nation-wide polls showing the Liberal Party a hefty 6 to 10 points behind Labor.
The election is unlikely to be held before May 2019, which is a long 7 months away. A lot can happen in that time but for the Liberal Party to get competitive, but for this to happen there needs to be a run of extraordinary developments.
In the aftermath of the Wentworth by election, the betting markets saw Labor’s odds shorten.
While the odds vary from betting agency to betting agency, the best available odds at the time of writing was $1.25 for Labor and $4.00 for the Coalition.
If, as most now seem to suggest, Labor is ‘across the line’, $1.25 is a great 25 per cent, tax free return for 7 months ‘investment’. Yet, punters are not quite so sure and seem to be holding off the big bets just in case something out of the ordinary happens.
While some segments of the economy look quite good, at least on face value – note the unemployment rate and GDP – others that probably matter more to voters – husong, share prices, wages and other high-frewquency cost of living issues are all looking rather parlous. And none of these are likely to change soon.
There is an old saying for punters – odds on, look on. But $1.25 for Labor seem great value.