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Co-founder & CEO of AllenWargent property buyers & WargentAdvisory (subscription market analysis for institutional clients).
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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).
4 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 better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.
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Monday, 11 July 2016
A blog reader told me last week that apparently Australia's "misery index" is rising fast!
I mused this for a while, but then thought that it sounded suspiciously like rubbish.
So I ran some numbers.
The concept of the misery index was first coined by economist Arthur Okun, and is calculated by adding the seasonally adjusted unemployment rate to the annual inflation rate.
Therefore, in theory at least, it tracks how tough life is for the average citizen.
As I suspected - it was rubbish. The index has been falling.
With good reason, Okun's misery index attracted some criticism for being somewhat over-simplistic.
In the late 2000s economist Steve Hanke created a modified misery index, which added the unemployment rate to the annual rate of inflation and the interest rate, less the annual growth in GDP per capita.
A similar concept, but in addition to unemployment and cost of living pressures, it also takes into account the rate of interest, which is a factor that impacts most homeowners these days.
I've used the cash rate here - but you can equally use mortgage rates, and the line plots a very similar path.
Any reading in single digits is a remarkably low result. Of course, Australia has low interest rates, low inflation, and, recently, a falling unemployment rate.
Meanwhile GDP per capita growth is tracking at a very healthy 1.7 per cent.
Hanke's modified misery index is at its lowest level on record.