Debt and deficits
I have a week in Dubai coming up - a country with no personal income tax - and later in the year, I'm visiting Singapore - a country with no net debt.
It's always tempting to look into sneaking residency in such places (and it's not even that hard for entrepreneurs in Dubai, through setting up a locally registered company. or by buying a qualifying property.
On the flip side, I sometimes wonder about the medium-term future for European countries, like my native (British) homeland, which is saddled with a net debt ratio surpassing 100 per cent of its annual GDP for the first time in more than 60 years.
Europe is facing various other demographic and migration challenges, as well as a general lack of dynamism and dependency on governments...and an anti-growth Coalition, if you will!
There's no need to delve too much into that here, but it so often strikes me how bloody lucky Australia is in terms of where it's located in the world, its ability to continue attracting skilled migrants from all around the globe, and investment from Asia and elsewhere.
And then there's the sheer depth of Australia's minerals and other resources: iron ore, thermal and metallurgical coal, natural gas, copper and copper ore, crude oil, aluminium and alumina, gold and silver...plus an abundance of all of the rural commodities, for good measure.
The "beaches, weather, and coffee" and the icing on the cake.
There's been a lot of debate about who should and shouldn't
get tax cuts this week, but as the budget shoots back towards surplus it's reassuring to be based in AAA-rated country where net debt is projected to ease back gradually to below 20 per cent of GDP over the next decade.
Australia took on a bit of debt to see things through the world's longest lockdowns, but there remains so much fiscal headroom if it's ever needed.
Advance Australia
There's been a lot of gnashing of teeth over the past 15 years about persistently high private debt levels, and Australia has been something of a victim of its own success in terms of its world-dominating
median household wealth per adult.
Australia also isn't "exactly like Ireland or Spain in 2006", with their painfully thinly-capitalised banks and roaring explosion in speculative credit, construction, and development.
Try setting up as a developer in Australia and getting finance for a project...you've got Buckley's chance, the lending settings are so tight.
Apart from Australia having its own currency and setting its own policy rates, today's global banks are enormously well capitalised by comparison to the pre-global financial crisis days.
Today the top 6 most highly capitalised banks in the world include ANZ (1st), Commonwealth Bank (2nd), Westpac (4th), and the National Australia Bank (6th).
Compare this to 2008, to a time when most banks around the developed world had Tier 1 capital ratios in the range of 6 to 8 per cent, and often lower.
Another dubious comparison is sometimes made between Australia and Japan, where the projected endless population decline has led to derelict ghost towns and villages across the country (although condominium prices in Tokyo could hardly be said to be cheap,
soaring dramatically to a record high in 2023).
If anything, Australia has the opposite problem: effectively too many people want to live here, immigration is tracking at record high levels, and the population is growing far more quickly than we can build for (not to mention the diabolical levels of traffic and the never-ending infrastructure deficit).
For sure there are ongoing challenges, then.
And we'll most likely get a cyclical downturn in a few years, most likely (pencil in an overbuild of new apartments in 2027, is my bet, especially of build-to-rent and other high-rise towers in Melbourne).
But, still, there are many goods reasons why more than 27 million of us choose to call Australia home these days.
Happy Australia Day, to those who celebrate.
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Core PCE inflation fell to 2.9 per cent in the US, the lowest since March 2021.
The Fed Funds rate is now 2.3 per cent higher than the core PCE inflation figure, as charted by Charlie Bilello above.
It's the most restrictive policy rate since September 2007.
The monthly rate of core inflation at 0.17 per cent was again very low, taking the 6-month annualised trend to below 2 per cent (and the 3-month annualised rate to 1.5 per cent).
In other words, interest rate cuts are on the way.
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