This time it is not as clear as the last boom-bust cycle because China is slowing and is basically on the brink of collapse with many people being made to repay their government salaries (are you shocked?). The Australian economy is vulnerable with the mining sector being in a precarious position which has been noted by the RBA.
Australian Housing seems quite bubblish compared to previous cycles but risks remain as a lot of low cost steel is being dumped from China and if the Ukraine conflict ends there could be additional shocks as Russian wooden engineering beams could come flooding the market.
Ultimately, there are concerns that apartment prices could collapse significantly as temporary migrants disappear and construction costs come down sharply. My preference is to avoid further investment in housing unless you are doing property development, but what are your insights?
Which sectors are best suited for investing in light of the current upcoming conditions? Of course leaving it in the bank at 2% rates is not acceptable if ANZ's actions hint where the bottom will be. Let's assume we have a reasonable amount to invest such as $800k to cover a broad range of strategies and a 5 year time horizon before the next possible round of interest rate hikes.
Since 2030 is coming up, are there any other unusual investments that could pay off, i.e. sustainable investments?
I am skeptical of whether Australia can come out of this next crash unscathed, and the next one might be so severe that it will put the US recession to a shame because of our excessive dependence on China. China is building more coal power stations, but they are burning less coal, with even less coal consumption to follow as more manufacturing is leaving the country. That production is being moved to more renewable friendly countries in south/south east Asia and the whole region is building out their renewables infrastructure collectively at a faster rate than China by itself could. This is because of the larger amount of space available across the Asian continent which means more solar/wind projects overall as every country in Asia joined onto the 2030 Agenda. Many other countries like Vietnam have pledged not to build additional coal plants after 2030.
This is good for the environment. But…
Ultimately that is a problem for the Australian economy with the climate goals of 2030 edging closer and closer.
Where are you considering investing for the next 5 years?
It is no good to see a pump in mining stock prices for 2-3 years for it to all come crashing down as we approach the year 2030. Maybe that is what will happen. I don't know.
@Thenarrator: It's not as simple as comparing the prices as something like VDHG (the index mutual fund) as it rebalances so you are seeing some of the capital gains through out the year which should then be reinvested. The actual unit price is sometimes only half (or less) of the story and unit prices usally stay in a pretty pretty narrow range. You need to factor in the dividend and you're also not accounting for dollar cost averaging - your method is just the simple return.