The normally reclusive investor/trader Stan Druckenmiller recently gave the world his thoughts on a variety of important trends – see Druckenmiller on Oil, China and the Euro.
He's back, just a few weeks later, outlining what he sees as a massive problem caused by aging.
His points are generally intended for an American audience, and there are important differences between their system and ours, not the least being the large pot of superannuation savings we have set aside. But it makes you pause.
One of my major concerns (held for many years, so perhaps unjustifiably) is the sheer amount of debt taken on by Australian citizens over the past few decades. Whether you look at it as a percentage of GDP or, as in the chart below left, as a percentage of disposable income, the growth in debt since 1990 is frightening.
Of course, interest rates are down and so the overall cost of servicing that debt hasn’t grown anywhere near as much, as shown in the chart on the right. But the burden is big and painfully exposed to higher interest rates.
That debt picture for our country is doubly concerning when you take into account the aging population. In just 12 years from 1996 to 2008, the median age of Australia’s citizenry increased from 34 to 37.3 years, according to the Australian Bureau of Statistics. It would be closer to 39 today.
More importantly, that population bulge known as the baby boomers is rapidly transitioning from one of the most productive periods of life—late career—into one of the least productive and most expensive periods—retirement.
All thing being equal, the older a nation’s population is, the more reason it has to be wary of debt. Clearly, Australia never got the memo.
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Forager Funds is a boutique fund manager specialising in a value investing approach. We offer an ASX listed Australian Shares Fund as well as an International Shares Fund both aimed at delivering returns for long term investors.