A View From Down Under

Two days into my flying visit, with the World Cup helping me fight the jet lag, I’d acclimatised to the sun and the craft ales but not the sea swimming…Scot’s inherently know the sea is to be avoided!

A further two weeks gave me time to pick up on some of the economic similarities and differences of life down under.

Many in the UK are quick to blame Brexit and the Government for our bleak financial outlook but Western markets are notoriously correlated, and Australia is similarly suffering from several of the same issues.

Sydney is very much a café and coffee culture. To my delight, independent coffee stores heavily outnumbered chains, I saw one Starbucks and no Costas. Lack of hospitality staff though is a common theme so perhaps the shortages we are facing aren't solely down to Brexit.

There are also industrial disputes. We arrived at a train station to be told by a smiling platform attendant that trains were free all week. Thinking it was perhaps a public holiday, or even a Black Friday related sale, we gave nod to our good fortune and hopped aboard.

We later discovered this is how their Railworker’s Union are currently countering the Government’s rejections to their demands. Rather than strike and cause disruption for commuters, they simply decided to continue as normal, but left the barriers open.

Headlines also screamed cost of living crisis, and certainly for British tourists converting from a weak Sterling, everything is a lot more expensive in Australia.

Inflation is comparably a problem with Australian CPI up 1.8% to 7.3% over the last 12 months.

Supply chain issues for our sister island economy has driven up prices…I’ve been told by more than two unconnected people the price of an iceberg got up to $20 (equivalent to £11.25). Why the focus on this particular lettuce I’m not sure. I can’t believe anyone would pay more than a few bucks for crispy water but maybe they are concerned for the fate of their Xmas prawn cocktail. (On that note, I don’t think I'll eat our miserable excuse for prawns again having now experienced sumptuous sausage sized shrimps from a barbie.)

Goods have a lot further to travel to get there than here, so maybe Brexit red-tape is more of a factor for our island economy as Australia still has a fair way to go before they suffer our heady inflation heights.

How about their stock market?

The ASX 200 (accounting for around 80% of the Australian share market by capitalisation) has rallied recently but is down 2% over the last 12 months, while our FTSE 100 is up around 6% on the year.

Bonds too are their main cause for portfolio problems (although not quite to our mini-Budget driven extent), with "Superannuation" balanced funds typically down more than the stockmarket over the same time period.

Interest rates are on the rise as well. The Reserve Bank of Australia has increased its rate 8 months in a row, from 0% (!) to 3.1%, placing the rate higher than the pre-Covid decade average.

Aussie Economists predicted a pause for respite after the previous meeting and were confident about rates staying below 3% by year end…it seems all experts worldwide are consistent in getting things wrong!

It took us 11 months to go from 0.1% to the current 3% and the speed of the incline has caught Australian mortgage holders off-guard with many expected to begin the same suffering we are very shortly.

Getting on the housing ladder is an issue. Recent research has shown Australians are moving back in with their parents, citing unaffordable rent, cost of living pressure, saving for a first home deposit, unaffordable house prices and lack of starter homes as the reasons for moving back home. Sound familiar?

The future of the Australian economy however appears to have some underlying fundamentals that mean it should not suffer the prolonged recession we are facing.

The UK bond market and the UK defined benefit market are joined at the hip with an estimated three-quarters of their assets in fixed interest funds. With almost no privately run defined benefit funds, Australia do not have this issue, and of the ones still operating, fixed interest allocations are much lower.

There are also concerns cited in their financial press over the UKs sovereign risk. These fears are tangible as the UK gross Government debt is equivalent to 100% of GDP. By contrast, Australia’s near $1000 billion debt is only equivalent to 45% of their GDP.

Even if it turns out to be much worse, it's likely the average response would be a simple shrug of the shoulders. "No dramas, she'll be alright."

Perhaps however, these are the headlines presented to a UK news hungry population in an attempt to demonstrate how bad things could be.

The average Australian is far more knowledgeable about the UK than we are of it. Be it the Royal Family, politics or our sport, this is a one-way level of interest which at times can make you feel embarrassed.

“How do you think Charles will do?” I was asked. “Charles who?” was my reply.

My mind just wouldn’t connect. After all, people in the UK are barely interested so why should anyone else. “How is Anthony getting on?” would be asked by no Brit ever.

Full marks to anyone knowing this is a reference to recently elected Prime Minister, Anthony Albanese. NB: He is getting on very well, his approval rating ending the year at its highest level. It appears the return of a no nonsense, non-populist, boring politician has found an audience.

Australia is a hugely comforting place to visit. Usually when we travel outside of the UK, we expect things to be different, but you immediately fit in. There is such a level of welcome and friendliness you don't experience during a visit to the US or any other English-speaking country.

I imagine growing up there, certainly Sydney, would seem like paradise to my 10-year-old self, be it the constant sun, the golden beaches, the exotic animals or the wonderful sports facilities.

However, while the 20 degree drop in temperature as I stepped off the plane was a shock to the system, there is something equally comforting about returning to the cold and the dark evenings. Perhaps that’s why early Scottish settlors didn’t stop at Australia, and decided to keep going south, to the colder, wetter climates of New Zealand and beyond.