Unleash the property wealth beast

The next phase of the investment revolution in Australia could be about to break, unlocking a ‘wall of money’ that could reinvigorate the economy.

Revolutions often happen slowly – so slowly that we think they’re over, when in fact they’re just beginning.

Take the dotcom boom. As a young reporter I covered it in London, Hong Kong and Sydney, where the parties were extravagent, the private fortunes made extraordinary, and the financial losses, when they came, excruciating.

After the bubble popped in 2001, the bah-humbug brigade assumed things had matured, when in fact today’s phase of increased social interaction, news-media consumption, online marketing and, ultimately, online purchasing is going from strength to strength. The ‘internet of things’ is the next step in this process and, again, is likely to roll out quite slowly.

Underneath the excitement of online business models is another slightly longer arc of history – the emergence of the retail investment industry.

Retail investment was, to most people, non-existent up until the late 1980s. But the market-forces set in motion by the Thatcher, Reagan and, here, by the Hawke government, began a revolution that has changed many lives.

Whereas once a wealthy individual had a relationship with a stockbroker in a wood panelled office – and perhaps played golf with them occasionally – the marketing of investment opportunities to everyday punters began to take over.

In Britain, The Observer newspaper put a fairly shabby little black-and-white supplement on private ‘retail’ investing into its main edition just after the crash of 1987 and found it had a hit on its hand. It evolved, rapidly, into a glossy magazine – Money Observer – that this commentator was fortunate enough to join while the dotcom bubble was still expanding.

Indeed, my colleagues and I took bets just before Christmas 2000 as to where the FTSE 100 index would be by the end of 2001. A senior colleague, who shortly afterwards become the finance editor of a national paper, expected 6500.

A full 13 years on the FTSE is once again back around that mark – from the open in 2001 it was ravaged by the dotcom sell-offs. In 2007 it was the sub-prime crisis. In 2008 it was the Lehman Bros collapse that nearly ruined the global financial system. And a few wars and terror attacks didn’t help.

A booming personal investment magazine industry was just as quick to develop in Australia – not least of which was the addition of Business Spectator’s sister publication Eureka Report in 2007.

Punters become players in finance markets with as much zeal here as anywhere else – more so, in fact, given the Keating superannuation guarantee, which meant everyday Australians had more to gain, or lose, than in just about any other country. And as many Australian families know all too well, a lot of punters lost their homes, their personal wealth and their jobs after 2008 – all thanks to the disastrous dealings of banks and finance houses around the world.

Their packaging, and repackaging of mortgage-backed securities, and their teetering edifices of derivatives trades, came crashing down. And they nearly took the global financial system – and thereby the real economy – back to a grim past that nobody should want to revisit.

So in many ways the long arc of personal investment reached a very depressing nadir in 2009 – just as the dotcom revolution had in 2001. The market bottomed, and mum-and-dad investors wondered who they could trust with their money.

In fact, they’re still wondering. My feeling, after a series of discussions and meetings in past weeks, is that they’re about to find out. The next phase of the revolution in Australia is about to break.

As explained in November (The huge opportunity in retirees’ hidden wealth, November 12 ), Australia’s property and superannuation investment markets are wildly out of kilter.

In short, the amount of lazy capital locked up in retirees homes could be put to better use, without the nation’s oldies selling up.

Moreover, the federal government, which has a long term problem of how to spark investment and productivity gains to help provide for an ageing population, should be doing more to unlock this capital. The haemorraging federal budget demands it.

When Business Spectator first published these ideas - from, amongst others, Ian Harper, the former Fair Pay Commissioner and now a partner with Deloitte Access Economics – it met with a huge response from readers.

Shortly afterwards, I was approached by a company, Domacom, that is one step ahead in facilitating the unlocking of the ‘wall of money’ that could do much to reinvigorate the flagging domestic economy.

Their ingenious  project, and some of its many ramifications for the wealth of the nation, will be covered in subsequent days.

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