The Reserve Bank of Australia meetings haven't been telling investors anything new for a number of months now – but have you been taking away the right message?
November's analysis was more of the same:
- GDP to remain below trend for 2014/2015 before improving in 2016
- Australian dollar is still too high, especially with the decline in commodity prices recently
- Housing boom continues apace, with investor-purchaser credit growing noticeably faster than loans to owner-occupiers
- Employment remains unchanged and jobs growth likely to remain subdued for some time
Long story short, the interest rate remains unchanged at 2.5%.
There's a message hidden in the minutes however; Australia's last boom has worn off and our economy has returned to normal growth rates – in fact, barely above the rate of population growth.
In other words, it's time to start working on our next wave of development. Commodities have taken us as far as they will; new ideas and developments will be required to improve the economy – and successfully identifying major growth areas can lead to major profits for investors.
I was a big fan of the carbon tax because I felt that the pressure to reduce emissions would encourage a clean tech boom, led by companies like 'artificial photosynthesis' developer Dyesol Ltd. (ASX: DYE).
After the scrapping of that policy, investors and the RBA are surely wondering – I know I am – where the next big leap in Australian progress is going to come from.
One exciting alleyway I see opening up is the rise of Australian technology companies like Newzulu Ltd (ASX: NWZ), Nearmap Ltd (ASX: NEA), and Freelancer Ltd (ASX: FLN), innovative digital businesses with big potential.
Australia has a lot of difficulty competing on the global stage thanks to our high cost of wages, which make up an estimated one to two thirds of the cost of doing business. This effectively cuts us out of the manufacturing arena, limiting our options to areas like finance, education, tourism, technology, and commodities.
Rapid growth and shortages of arable land in our South-East Asian neighbours – not to mention increases in living standards driving improved diet – are likely to see increases in demand for Australian beef and wheat – two of our biggest exports and also our fastest growing exports in recent times.
Graincorp Ltd (ASX: GNC) and Australian Agricultural Company Ltd (ASX: AAC) are the ASX's biggest grain and beef offerings respectively, and most investors will probably be aware of the recent blocked takeover effort of Graincorp by a U.S. company.
Unfortunately, Australians can't rely solely on external factors like commodity demand or the hard work of our entrepreneurs to improve our standard of living. One of the RBA's biggest bugbears at the moment is productivity, and it has repeatedly warned that the next decade is going to involve substantially slower growth in real wages than the previous decade.
Combined with this is the fact that Australia's growth in productivity is estimated as among the slowest in the G20 nations.
It's not that people need to work harder per se, but greater investment in working smarter and more efficiently is definitely required.
Slowing wages growth also means that you need to work smarter, not harder, to ensure your retirement is as comfortable as you want it to be.
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