Introduction

To stem its then soaring population growth rate, which was widely believed to be crippling economic development, China introduced the draconian ‘one child policy’ in 1979 – a move now seen as directly lifting 150 million people out of poverty.

The policy focused global attention on fertility rates around the world. It raised the question of whether strong birth rates enhance economic growth or, in fact, stop countries from reaching their full potential.

Introduction

The word ‘inflation’ doesn’t only dominate business news headlines, but finds its way into general news reports too.

So, what is inflation and how does it affect you? 

In simple terms, inflation signifies a rise in the price of goods and services, meaning you pay for more for every purchase you make. 

Introduction

In 2007 China displaced Japan as Australia’s largest trading partner. In 2009 it became Australia's largest export market, and in 2017-2018 we sold A$123.3 billion worth of goods and services to China – 30.6% of our total exports. In comparison Japan, still our second most important market, only took 12.7% of our exports.

On the flip side China supplied us with 18% of our imports worth A$71.3 billion. Our total economy, as measured by GDP, was worth around A$1.9 trillion at the time, so our two-way China trade made up about 10% of our economic activity. That may not make us totally reliant on China for our economic health, but any major disruption to that trade means Australia will have many billions of dollars less to run our schools and hospitals, pay pensions and wages, and to maintain our high standard of living.

Introduction

There’s an old saying in investment circles: ‘when Wall Street sneezes, the rest of the world catches a cold’. That’s not surprising. The New York Stock Exchange is by far the world’s largest, so what happens there is bound to be noticed by stock exchanges everywhere, including Australia.

It works on the upside too. A good day on the US market is more likely than not to be followed by a good day here (and elsewhere). This is particularly so when comparing similar indices such as the S&P 500, which tracks the performance of the top 500 US companies, and the S&P/ASX 200, comprising Australia’s top 200 shares.

Introduction

Interest rates have never been lower, and it’s possible they might fall even further. This creates opportunities for householders and businesses, so how can you best take advantage of low interest rates?

1. Pay off your debt more quickly
By maintaining constant repayments as interest rates fall, you’ll reduce the time it takes to pay off your loan. That’s because interest will make up less of each repayment, with more going to reduce the outstanding capital. And the great thing is that to take advantage of this strategy you don’t need to do anything. Lenders usually maintain repayments after each drop in interest rates unless you instruct them otherwise.

Introduction

The price of a lowly head of lettuce has never been a recognised barometer of the strength of the Australian economy, that is until the media started reporting iceberg lettuces were selling for $10 a head.

Suddenly, this has become a touchstone for everything that is wrong with the domestic economy. Prices are on the rise, spurred by higher transport costs and climate-based disruptions to the food chain, and the cost of living is surging.

While some relief came with an unexpected 5.2 per cent increase in the basic wage, a move endorsed by the newly elected Federal Government, the prospect of similar inflation linked wage increases were dismissed as a ‘baby boomer fantasy’ by the trade union movement.

Introduction

You might think that only importers and exporters pay attention to the value of the Aussie dollar, but movements in the exchange rate affect us all.

What are the main influences on exchange rates? Ultimately it comes down to supply and demand, and that can be determined by a number of things:

Introduction

GDP. If ever there were three letters designed to make us yawn, these would be solid contenders. So why are they so frequently on the lips of politicians, economists and finance journalists? More importantly, what does GDP mean for everyday Australians like you and me? Let’s get the boring bit out of the way first.

What is GDP?

GDP stands for Gross Domestic Product, which is the value of all of the goods and services produced by a particular country. This includes, amongst other things, private and public purchases, government spending, investment, plus the value of exports minus the value of imported goods and services.

Yep, boring.

Except that GDP provides a relatively simple way of conveying the overall strength of a country’s economy which directly affects our lives.

Introduction

That $50 note in your pocket. What’s it worth? “$50,” you say, probably thinking it’s a dumb question. But is it really? Or a sheet of plastic and a bit of ink that likely cost the note printer less than a cent? Your $50 note only has value because the government declares that it does.

This lack of intrinsic value means your $50 note, and the balances of bank accounts that represent most money in circulation, might better be described as currency rather than ‘real money’. For the majority of us most of the time this distinction is of no great importance, but there are times when it matters a great deal.

Introduction

Banks have not been passing on the full reduction in the Reserve Bank’s official cash rate, but no one knows with any certainty, what the future holds for rates and to what extent.

Most predictions are that they will remain at the low end for some time to come, so while borrowers love low rates and savers curse them, what can be done to make the most of the situation?