Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Monday, 14 July 2014

Wages haven't fallen in 17 years

A further interesting consideration for investment decisions, both in share markets and property markets - wages growth.

Aggregate growth may be weaker than it was during the mining construction boom run-up, but mid-year consensus forecasts from economists suggest that wages will probably rise by another +2.9% in the year to 30 June 2015. 

In fact, wages have continued to rise relentlessly throughout the period covered by the ABS Wage Price Index (click chart):

Indeed, track back the wages price index over the long run and it's interesting to note how public and private sector wages have mirrored each other while doubling in tandem (click chart):

A bit like rising rents, wages have never recorded falls nationally, and this may be partly to do with behavioural economics. 

Wages growth may slow, and at times sink below the rate of inflation, but it's a very hard sell to dish out nominal pay cuts to employees.

Studies have shown that people may often settle for receiving a pay rise below the rate of inflation, but cutting wages is rarely a popular course of action, even if there is a prevailing price deflation.

It's a cognitive bias.

Graph 1: Inflation over the Long Run

Looking at the long run inflation chart it strikes me that there is very much to be said for spending less than you earn and investing in quality assets for the long haul using a buy and hold strategy.

Not so much to be said for saving cash and waiting for markets to get cheaper at some unknown future point in time. 

Timing the markets appears to be very easy in theory (or in retrospect) but you only have to look back at the catalogue of erroneous predictions over the years to see how this is not the case.