Level 3, 18 Dequetteville Terrace, Kent Town SA 5067

(08) 8362 0060

(08) 8362 0061


Australia Still Punching Above Its Weight

Australia Still Punching Above Its Weight

Australia, take a bow. We are on the brink of overtaking the Netherlands’ record for the longest period without a recession and very close to pulling off an even greater feat. Not only have we survived the end of an extraordinary mining boom without going bust, but the economy is showing signs of renewed growth.

Many economic commentators feared the worst when Australia’s economic growth went backwards by 0.5 per cent in the 2016 September quarter. But as the latest Bureau of Statistics national accounts show, the economy rebounded by 1.1 per cent in the December quarter, taking the annual rate of GDP growth to 2.4 per cent.

You could almost hear the sighs of relief from economic commentators, as two negative quarters are the technical definition of recession. Australia has navigated 102 quarters – or 25 and a half years – without recession and it’s highly likely we’ll beat the Netherlands’ record of 103 quarters this financial year.

Not only are we breathing down the neck of the Dutch, but we’ve avoided the worst effects of the so-called “Dutch disease” where a boom in one part of the economy results in terminal decline in other sectors.

How did we pull it off?

There are several reasons growth rebounded so convincingly in 2016, that augur well for the future.

After falling off a cliff since their peak in 2011, prices of some of our major commodity exports such as coal and iron ore rose sharply last year. Export volumes are also on the rise as resource projects are completed and the lower dollar fuels overseas demand for our services such as education and tourism.

This resulted in a striking improvement in our terms of trade – the prices we receive for our exports compared with the prices we pay for imports – which improved by 9 per cent in the December quarter and almost 16 per cent for the year.

Wages growth has fallen too, which is good for the corporate sector because it helps improve our international competitiveness, but not so good for consumers. Company profits as a share of GDP rose 16.5 per cent in the December quarter, while wages’ share of GDP fell by 0.5 per cent.

There was more good news in the form of new business investment spending which grew by almost 2 per cent in the December quarter. While mining investment continues to decline, non-mining business investment is showing positive signs of taking up the slack.

Buoyant company profits

The positive economic report card owes a lot to our healthy corporate sector. The December half reporting season revealed that 69 per cent of companies increased profits, well above the norm, with a median increase of 4 per cent year on year. i

While that’s good news for the economy, the focus on dividends also gave investors plenty to smile about. Close to 90 per cent of companies paid a dividend and 82 per cent of those lifted or maintained their payout. Over the next few months, more than $22 billion in dividends will be paid to shareholders. It’s not just direct share investors who benefit; the millions of Mums and Dads who are members of superannuation funds will receive a boost in annual returns. As the graph shows, the dividend yield on Australian shares is currently around 4 per cent, well above inflation of 1.5 per cent and the interest rates available on bank deposits.

Yields on shares


Source: Iress, CommSec

Money isn’t everything…

As important as the economy is, it doesn’t tell us everything about the wellbeing of ordinary Australians. The Fairfax-Lateral Economics wellbeing index – which monitors the collective state of the nation based a broader range of indicators – grew by 5.8 per cent in 2016, more than twice the 2.4 per cent growth in the economy. ii

National income – to households, business and government – rose strongly although business received the lion’s share of growth. There was also a big lift in our skills and knowledge base, thanks to growing numbers of adults with higher qualifications.

We fared less well on measures of inequality, health, work satisfaction and the environment. Some of the challenges Australia faces looking ahead are around issues such as underemployment, housing affordability and equal access to quality health services and education.

…but it helps

On balance, Australia has more reason than most nations to feel upbeat. The unwinding of the mining investment boom is almost over and the surge in resource exports is beginning to pay dividends. Non-mining investment and public spending on infrastructure are finally gaining momentum. And economic growth is on track to return to 3 per cent this year, as we edge towards 26 years without recession.

If you would like to discuss the contents of this article in relation to your investment strategy, don’t hesitate to give us a call on 08 83620060

Owl Financial Management is an Adelaide Based Financial Planning Business.

i Dividends start flowing’, CommSec, 13 March 2017 https://www.commsec.com.au/content/dam/EN/ReportingSeason/February2017/Eco_insight.13.03.2017dividends-start-flowing.pdf

ii Wellbeing index reveals life got better for Australians in 2016’, Matt Wade, SMH, 3 March 2017, http://www.smh.com.au/business/the-economy/wellbeing-index-reveals-life-got-better-for-australians-in-2016-20170303-guq6ob.html

Financial Advisor Adelaide

We are an award winning practice that has been providing financial advice to South Australians since 1969. We really enjoy getting to know our clients and building a relationship with them that lasts over many years. We have a diverse range of clients from mum and dad to AFL players to ASX CEOs. All of which have a diverse range of financial advice needs and very different relationships to maintain. Our clients describe a 'breath of fresh air', personable, expert and people with high integrity. Clients have also mentioned that they are not treated as a number and the advice is specific to them. Working with clients for clients.

Financial Planner Adelaide

The one most rewarding thing about being a financial planner in Adelaide is when you have been working collaboratively with a client in developing and building their goals and objectives and the come to fruition. This give both the clients and myself a real sense of achievement and to use the famous quote 'are we there yet?' and together we can say YES! There has never been a better time to look towards what you want to achieve and start a financial plan so you can get there too.

Financial Planning Adelaide

A person's financial story is like a jigsaw puzzle... "lots of pieces needing to be put into their correct places". A financial adviser can assist a client to put the pieces in the right places by having a series of simple conversations about where a they are currently situated, where they want to be and what strategies can assist them. Every client has a different financial story and goals. Each jigsaw puzzle will always be different. A good financial adviser is experienced at putting together a wide range of jigsaw puzzles. Helping a client put their own puzzle together and seeing their satisfaction is a wonderful feeling.

Barry Phillis and Owl Financial Management Pty Ltd are Authorised Representatives of GWM Adviser Services Limited Australian Financial Services Licensee Registered Office at 105-153 Miller Street North Sydney NSW 2060 and a member of the National Australia group of companies.

GENERAL ADVICE WARNING: The advice on this site may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial advice prior to acting on this information.

Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the National Australia group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. View Terms & Conditions >