Economy might be a bit blue but optimism grows
‘‘Endless pessimism is in itself a risk to the global recovery, just as it weighs on business and consumer sentiment in Australia’s economy,’’ he said last week.
But the federal Treasurer may not need to worry. Turns out Australians are a positive bunch, with two in every three believing the country has a bright economic outlook, a new Westpac report and Australia Day survey shows.
And of those optimists, another two-thirds believe the positive outlook will persist for the next five years, bolstered by our resources industry and proximity to the fast-growing Asian region.
‘‘The survey really shows us that Australians are a lot more positive than perhaps they have been portrayed by certain commentators in the market,’’ Westpac’s general manager of retail banking, Gai McGrath, said.
In keeping with the growing positivity in the markets, Australian shares hit a 20-month high on Thursday, closing above 4800 for the first time since May 2011.
The benchmark S&P/ASX 200 added 22.4 points, or 0.5 per cent, to 4810.2, while the broader All Ordinaries Index jumped 21.7 points, or 0.5 per cent, to 4833.8.
Recent data out of Beijing has also pointed to a steadier economic outlook for China, Australia’s largest trade partner. On Thursday, a preliminary reading of HSBC’s purchasing managers index showed China’s manufacturing was expanding at its fastest rate in two years.
But the International Monetary Fund said the unexpectedly stubborn eurozone recession and weakness in Japan would continue to weigh on global economic growth this year before a rebound next year.
The IMF trimmed this year’s forecast for global growth to 3.5 per cent from the 3.6 per cent it projected in October, but said it looked for expansion of 4.1 per cent in 2014, provided the recovery in Europe took hold.
‘‘Optimism is in the air, particularly in financial markets, and some cautious optimism may indeed be justified,’’ the IMF’s chief economist, Olivier Blanchard, said.
Respondents to the Westpac survey also showed a strong preference to investing in residential property and shares, over term deposits or savings accounts, with 30 per cent picking property as the best value-for-money investment option in Australia.
Ms McGrath said Australians were increasingly aware of the importance of diversifying risk in an investment portfolio.
‘‘People are talking about real estate as being the best value for money,’’ Ms McGrath said. ‘‘I don’t think people would have been saying that five years ago when we had a big real estate boom and people couldn’t find real value.’’
The Westpac survey, which canvassed 1000 people, also found that 37 per cent of respondents listed saving more money as their top financial priority for the year ahead, followed by making a personal budget and paying off the mortgage.
Frequently Asked Questions about this Article…
The Westpac Australia Day survey of about 1,000 people found two in every three Australians believe the country has a bright economic outlook. Of those optimists, around two-thirds expect this positive outlook to continue for the next five years, citing Australia’s resources sector and proximity to fast-growing Asian markets as supporting factors.
Australian shares recently reached a 20‑month high, closing above 4,800 for the first time since May 2011. The S&P/ASX 200 climbed 22.4 points (0.5%) to 4,810.2 and the All Ordinaries rose 21.7 points (0.5%) to 4,833.8. For everyday investors, this signals increased market confidence, though it should be weighed alongside global risks highlighted in the article.
Respondents showed a clear preference for residential property and shares over term deposits or savings accounts. Thirty percent of those surveyed picked residential property as the best value-for-money investment option in Australia.
The Westpac survey found 37% of respondents listed saving more money as their top financial priority for the year ahead. The next most commonly cited priorities were making a personal budget and paying off the mortgage.
Positive data from China — including a preliminary HSBC purchasing managers index showing manufacturing expanding at its fastest rate in two years — supports Australia’s trade outlook. However, the IMF warned that a stubborn eurozone recession and weakness in Japan will weigh on global growth, trimming this year’s global growth forecast to 3.5% (from 3.6%) while projecting 4.1% growth in 2014 if Europe recovers. These mixed signals create both upside and downside risks for Australian investors.
The article conveys a tone of cautious optimism: market sentiment and some economic indicators are improving, but global risks remain. The IMF’s chief economist said some cautious optimism may be justified, so everyday investors might consider the improving local sentiment while staying mindful of international headwinds.
Westpac’s retail banking manager Gai McGrath noted Australians are increasingly aware of the importance of diversifying risk within an investment portfolio. Given survey preferences for property and shares and varying global conditions, diversification across asset types can help manage risk rather than relying on a single investment class.
Based on the survey, many Australians are prioritising saving, budgeting and reducing mortgage debt while showing interest in property and shares. A practical takeaway for everyday investors is to focus on building savings, keep a personal budget, consider debt reduction, and think about spreading investments across assets (property, shares, cash) to balance potential returns with risk.
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