Second Coming

For almost three years Australian’s have been in love with saving cash and saving into cash-like investment products, with anecdotal reports estimating the build up of business and retail cash savings now somewhere north of $1 trillion and growing.

Over this period burningpants has also been reporting that borrowing is down – not just new borrowing, but old debt – as people and businesses go through the process of deleveraging at what can only be described as a prodigious rate.

As diligent researchers we have been engaging the market every month for the first signs that the savings boom is over and the first green shoots of a spending wave are coming alive.

Well here’s the good news – the first signs are there – it looks like NSW, in particular the rich in NSW, are starting to think about shares again – our most recent data suggests after almost three years on the sidelines over the next three months shares are going to see a boost as investors engage once again.

However the story isn’t as straight forward as that – the appetite for shares still retains an element of caution.

Since October 2007 (when investors ran to the hills) we have been watching the market closely for the first signs the majority of previously invested Australians are returning to the market; and after a false dawn in November, the time appears to be now.

The first cab off the rank is usually deferred spending – that means buying the washing machine, the car, the clothes that you have avoided for two years, then the investing – so like hawks we are watching retail receipts, the real estate market and the share trading volumes,  but to quote Wallace Greenslade in the great Goon Show Production; Number 10 Downing Street Is Missing… All of  a sudden nothing happened. And then by complete surprise, nothing happened again.

Back to the research drawing board, trawling through the data from our High Net Worth Research, through the Consumer Sentiment Index, through numerous focus groups and the 20-odd large quantitative pieces that are in field… we eventually spotted it.

Deep in our Direct Investment research, which was designed to measure how Australians are likely to invest in the coming year, how much they are going to use advisers or do it themselves – was the data and it was stunningly clear: Investments this year are not going to be made from retained savings – but from new earnings.

It seems that no one is convinced that we are out of the economic woods yet – that while they might have enough cash and that shares are the next best option, they are reluctant to risk their retained savings and are only likely to risk any new monies they have.

Suggesting investors remain convinced that something unresolved still lurks in the economic ether.