For years, Australia has been seen as the goose which laid the golden egg for workers, migrants and investors. Ironically, as America’s casino closes, it will eventually end up as a speculator’s paradise.
The performance of the Australian stock market relative to its American equivalent since the Global Financial Crisis (GFC) shows the difference between a country where Quantitative Easing (QE) – the buying of bonds by the central bank to drive bond prices up and interest rates down, and thus encourage firms to invest and financial institutions to buy shares – was practiced and one where it was not. It’s both a warning about what could happen when the Fed starts to unwind QE, and a perverse opportunity to profit when Australia’s central bank, the RBA (Reserve Bank of Australia) inevitably starts its own QE program.
Since Australia avoided the GFC, and its rate of economic growth has been twice as fast as America’s post-crisis (an average 2.7 percent per year, versus 1.3 percent for the US), you might expect Australia’s stock market to have done better than America’s. In fact, it’s performed much worse: the main Australian index, the ASX, still hasn’t returned to its mid-2000s peak, while the US S&P500 has more than doubled its pre-crash level, and it’s almost four times as high as it was in the deepest depths of 2009 …
Steve Keen, RT.com