Yes, coming up for 18 months since he toppled T. Abbott. It seems like only yesterday doesn’t it?
It’s probably fair to say The Donald has packed more into 50 days than Malcolm has managed to squeeze into 500 days, for which reason the Australian PM is on the skids, apparently soon to be supplanted by that charismatic paragon of populism, Peter Dutton. Or not.
The question for us is not so much whether Turnbull gets the boot before or at the next election, but whether investing in Australia is a good idea at all.
It comes down to risk – of a different sort to America. In the US the risk is human, or perhaps psychiatric, embodied in one individual; here the personality disorder is more extensive.
As I see it there are two broad investment risks in Australia: widely shared political failures and the even more widely shared enthusiasm for housing and debt.
Ten years of deceit and dispute have left Australia without an energy policy that makes any sense. As a result there is a real danger that the high cost of electricity and shortage of gas will at worst cause a recession, and at best hold the country back.
Household debt is at a record high which means the economy is more sensitive to the interest rate cycle than ever before. As inflation returns, and the Reserve Bank is minded to raise interest rates, it will be playing with fire.
Again these risks are difficult to quantify. Measuring volatility doesn’t do it – in fact the Australian Vix index is even lower than America’s, and is at a record low.
ASX 200 Vix index of volatility:
Nevertheless the risks in Australia are unusually high – not unacceptable, requiring flight to cash, but high.
Higher than in America? Well, at least our market isn’t quite as expensive, but that’s offset by the energy problem (the US has a gas reservation policy requiring producers to keep enough to keep domestic industry going; Australia does not).