There is plenty to be worried about in the Australian economy, but we shouldn’t overlook the good news.
The finance pages are dominated by doom and gloom, and often for good reason. But that doesn’t mean we have to be miserable all the time.
Yes, we do live in tough times. Wage growth is at a record low. House prices continue to rise, contrary to reports of cooling in Sydney and Melbourne. Economic growth is stagnant, suggesting we haven’t fully recovered from the crisis 10 years ago, and underemployment is the highest ever.
However, there are plenty of statistics we can be relieved or even downright optimistic about.
As of May, Australians owed $1.7 trillion in mortgages, the ABS reported last week.
A mass failure to pay could trigger a banking catastrophe on the scale of the US mortgage crisis that began in 2007 and spread around the world.
However, despite record-high mortgage debt, Australians are coping relatively well. Arrears rates are low and many households are building up buffers in their mortgage offset accounts.
According to the Reserve Bank, roughly two-thirds of housing borrowers are at least one month ahead of their scheduled repayments, half are six months or more ahead – and barely any are more than 90 days in arrears.
So alarm bells aren’t ringing just yet.
Credit card debt in decline
Despite strong population growth, credit card debt has been gradually falling ever since 2011, as the crisis started to recede.
Over the past six years, credit card balances attracting interest have reduced by about $4 billion.
These balances peaked at $37 billion in February 2012, and were down 11 per cent to $32.8 billion in May this year.
This puts the average debt per card holder at a high but manageable $4000 – another positive sign that the economy isn’t exactly flashing red.
Owner-occupiers are back
Property prices in the important markets of Sydney and Melbourne are still growing and home ownership rates falling, but a crackdown by the bank regulator appears to be helping more families buy a home to live in.
The share of new loans for already built dwellings going to owner-occupiers is continuing to trend upwards, as investors get squeezed out.
Owner-occupiers are regaining buying power because the banks have hiked rates for investors while cutting rates for everyone else, at the behest of the Australian Prudential Regulation Authority, which intervened in March.
As a result, owner-occupiers borrowing for established dwellings rose from a share of 49 per cent of new loans in October and December last year to 52 per cent in April and May.
Falling jobless rate
Underemployment is at a record high and wage growth a record low, but at least we can celebrate the creation of more full time jobs.
For the past 31 months, the official jobless rate has been generally trending lower, apart from the occasional soft patch.
Just this year, between January and May, 112,700 more workers were employed, and most of those jobs (83,400) were classified as full-time.
Workers will be hoping this trend continues when the statistics bureau releases the June labour force figures on Thursday.
Rising superannuation balances
And finally, Australians have never saved more for retirement.
As of March, we had $2.66 trillion in superannuation assets, making us the fourth-largest holders of pension assets in the world, behind the US, UK and Japan.
The cause of this massive spike in super savings since the early 1990s was Labor’s introduction of a compulsory scheme, which requires employers to pay a levy based on their workers’ wages.
The Hawke government legislated the ‘superannuation guarantee’ in 1991 and it came into force in July 1992. Before then, Australia had no nationwide superannuation system – only the age pension.
Some employers and industrial awards provided for super before then, but not all. Those without retirement savings deducted from their pay cheques were expected to rely on either the pension or, if they were lucky, a generous defined benefit scheme.
While pension assets fell between 2007 and 2009 during the global crisis, the subsequent low interest rate environment has stoked global equity markets and boosted the value of infrastructure investments, which has helped increase our superannuation assets.