Australian consumers have big problems…
Their nemesis? The apparent overvaluation of the Australian dollar and the cost of living.
Places like Sydney, for example, are on par with Manhattan and London when it comes to purchasing power. In fact, a recent survey put Sydney as the fifth-most expensive city in the world.
I just experienced this for myself on a visit there. For example…
- A cab ride from Sydney Airport to the city center costs more than A$60 (US$54). It was less than eight miles.
- A Snickers bar will set you back around A$2.50, and a single pack of Pringles around A$4.
- If you’re a smoker, you’ll pay more than A$20 for a pack of cigarettes.
- And real estate? It’s stratospheric, with million-dollar-plus price tags being the norm in desirable areas.
At the same time, the minimum wage is close to A$17, or about $620 per week for a full-time worker.
It’s no wonder that the average Australian is up to his eyeballs in debt. Much more than most people in the world, actually, with a household debt-to-disposable-income ratio of more than 150%.
This is nothing new for Aussies, who’ve been riding a credit boom for two decades now… a dangerous trend that looks set to continue.
The good news, however, is that the outstanding energy and resource boom is also set to continue… courtesy of massive economic growth in Asia.
And with such growth comes an insatiable demand for energy – namely, from Australia.
This is where the action will happen for Australian shares, which could result in a profit bonanza in the years ahead.
One More Play on Australia’s Booming Energy Market
As I noted last week, the liquefied natural gas story in Australia is playing out in real time, versus what’s happening in the United States.
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If you recall, I mentioned Santos, Ltd. (Australia: STO) as a way to play the boom.
But I also promised to share two more Australian energy investments, given that opportunities abound from local utilities to major drillers and speculative companies looking to strike it rich.
After further due diligence, however, I’ve narrowed it down to one…
Karoon Gas (Australia: KAR) is a Melbourne-based small-cap exploration firm that’s had success in drilling for oil and gas in both Australia and Peru, as well as Brazil’s Santos Basin.
It’s enjoyed a 70% success rate in offshore exploration drilling to date.
Sporting a market cap of only A$770 million, with over A$270 million in cash, it’s a potential takeover target for one of the major producers looking for an inexpensive way to acquire quality assets.
Bottom line: Australia has Asia’s incredible economic boom to thank for its two-decade growth streak. And while that growth may be moderating from a mining standpoint, in the coming years, the region’s unrelenting energy needs may prove to be the biggest driver of Australian growth yet.
And “the chase” continues,