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THE stock markets you should ideally have had your money in over the past 12 months were South Korea and Peru. It is doubtful your financial adviser mentioned those.

However, Australian share prices proved remarkably fireproof during the same tough period. The S&P/ASX index was down just 3 per cent, compared with ghastly losses in the US and Europe. Clairvoyants who sold out in March, when the market was at an all-time high, are building another wing on their Dalkeith digs. Mum and dad investors, who ignored advice to sell their bank shares, saw gains of 20 per cent in NAB and ANZ, as well as pocketing handsome fully franked dividends. Analysts were asking last year why US banks were rated lower than their Australian counterparts. Now they know. The most eye-catching fashion accessory being worn by many of their big customers is handcuffs.

In the US, the 500 stocks in the beaten-up S&P index yield an average of less than 2 per cent. Back in 1982 they were offering a return of 6.7 per cent. For the next 18 years, Americans were educated to not worry about boring old dividends in the great bull-run. The subsequent crash brought very large second thoughts.

Foreign fund managers have been net sellers of Australian stocks this year to plug holes at home. Paradoxically, some may return if the world economy further deteriorates.

Investor relations company Orient Capital has surveyed 44 US institutions that hold $A10.2 billion in local stocks. The finding was that Australia would retain its ‘safe haven’ status if the US, Japan and Europe continue to struggle. The stocks moving up their favoured list include WMC, AMP, Mayne Group, QBE Insurance and Telstra.

The US investors praised Australia for defying economic gravity. But at the first sign of a global recovery, they say they would shift investments out of here into the markets of Thailand, Taiwan, Hong Kong and China. That gives you some insight into why these characters find it so hard to make money for their clients.



Making the best of a good job

JUST when the market economists were telling us we could forget about more interest rate hikes this year, along came the August payroll numbers. They showed an 88,500-person jump in employment, the largest monthly increase for more than a decade. The boost in full-time jobs is finally catching up with the growth in domestic output, which is expanding at the fastest pace since the 1980s. Adding the number of people actively looking for work to those already employed, Australia’s labour force hit 10,000,000 for the first time ever. Business investment is rising, housing construction remains strong and consumer spending is supported by higher wages.

That’s great, yes? Well, maybe. NSW snared the bulk of the white-collar job creation. Its unemployment rate dropped a full point to 5.3 per cent

The national average is 6.2 per cent and WA is significantly higher. But the trend numbers are encouraging and reflect an economy still growing at close to a gangbusters 4 per cent. The Sydney-centric RBA is itching to increase interest rates from their current 4.75 per cent. It wants to hose down the overheated property market and keep the inflation dog in its kennel. The chaos on international stock markets has given Australian business, and mortgage payers, six months longer of cheap money than they could have hoped for. Now the Washington war drums are providing another level of uncertainty. Wheat farmers battling the drought are fervently hoping this will further stay the heavy hand of Ian Macfarlane.

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