Episode 50: Australian states taking on more debt to fuel infrastructure

The overwhelming theme between Australian state budgets for the next financial year is a drop in revenue due to stamp duty. However, on the spending side, the majority of states plan to go into debt to invest in infrastructure.

Brett predicts this will be a good move for the Australian economy due to the small amount of debt it will create balance against the slate of projects creating an influx of jobs. The five mainland state budgets reveal they will triple their debt over the next four years on infrastructure splurges. Despite explosions in debt sizes, the property opportunities, job creation and improvements in communities will positively impact the economy. 

Some may not agree with the economics of governments borrowing money in order to spend it. However, reserve bank governor Philip Lowe urges governments to borrow even more, since, as of today, Australia can borrow at the cheapest rate since becoming a federation. With the ten-year government bond rate at 1.35%, the government can borrow for at least 30 years at less than 2%. He states now is the time to borrow and run projects with risk adjustment returns at 1.5-2%. Listen in for more on our discussion on governments borrowing money to invest. 

This Week’s Investor Exchange Round Table Covered:

  • Joel discusses the cyclical industries in the Australian economy on the Australian stock market that might benefit from this splurge in government spending. More jobs created by infrastructure projects can lead to more money on spending and consumption, which could line up for a cyclical turn in the Australian economy. (12:20)
  • Joel explains some ‘crazy’ things happening in the stock market. We are ten years into the recovery phase following the 2009 global financial crisis, and stocks are now breaking out too close to all-time highs in Australia and the US. Listen in for more on research on movements in the US Stock market this past May. (14:38)
  • Louis discusses clocking hours versus productivity. What do companies truly want? Of course, it’s results. But how is your company evaluating results? Listen in for Louis’ take on evaluating outcomes in the workplace and demonstrating the effectiveness of your work. (34:46)

You Cannot Be Serious:

Taking a look into some of the biggest mistake brands have made, we found that back in 2014 American Apparel accidentally tweeted a picture of the Space Shuttle Challenger explosion, mistaking it for an image of fireworks in a bid for a 4th of July promotion! 

One dad learned from his teenage daughter what an Instagram influencer was, and decided he could do it too. So he starts an Instagram account called @justaconstructionguy. He posts photos of himself doing construction things and taking a piss take on standard influencer images, and now has more than 300k followers!

Listener Questions:

Write in to get your investment and wealth management questions answered by Joel, Brett and Louis.

Ask a Question: https://theinvestorexchange.com.au/ask/

Join the Conversation: fb.me/theinvestorexchange