Time to buy Australian and support our nation

The Australian stockmarket has outpaced the US. Picture Getty Images

In the depths of the 2008 global financial crisis, billionaire Warren Buffett published an article in the New York Times titled “Buy American, I am”. The story was a reminder to all Americans that their nation would overcome the seemingly insurmountable crisis.

And Buffett was right.

The long-term outlook of the US economy was robust and the GFC presented an opportunity to buy stocks cheaper than almost ever before.

In the months that followed, the US economy began to recover, financial markets rebounded, and the American way of life returned. The market low of March 2009 was the starting point of a decade-long financial bull market.

Those that followed Buffet’s advice were rewarded with an astonishing 500 per cent-plus return in just over 10 years (buying the S&P 500 with dividends reinvested).

As impressive as this may be, the real “buy American” story began decades earlier.

Buffett began buying American in 1956 when he opened his first investment partnership. Over the proceeding 65 years he has delivered an amazing return of 20 per cent-plus per annum. Much of this performance should be attributed to Buffett’s own investment skill, but it cannot be ignored that he also benefited from the significant expansion of the US economy.

Since 1956 US GDP has grown 3.5 per cent per annum and the stockmarket has returned an impressive 6.8 per cent a year (all figures are adjusted for inflation).

A $1000 investment in the S&P 500 would now be worth $72,000. For those interested, a $1000 investment with Warren Buffett would now be worth $19m.

While Buffet has been successful beyond nearly every definition of success, he made one key mistake.

Well, in fairness, not a mistake — rather he was born in the wrong country. Buffet should have in fact been “buying Australian”.

Since 1956 Australia’s GDP has grown 3.5 per cent per annum and the stockmarket has returned 7.3 per cent, outpacing the US. In fact, Australia’s stockmarket has delivered the highest returns globally since 1900, averaging more than 6.5 per cent a year.

Australia’s property market has also shone, growing a robust 2.5 per cent per annum since 1956.

Warren Buffett, CEO of Berkshire Hathaway. Picture: AFP

Beyond the financial metrics, as Australians we are blessed with a quality of life almost second to none, diversity of culture, outstanding healthcare, low unemployment, world-leading education, low levels of poverty and homelessness, crystal beaches, the stunning outback, AFL and of course our coffee.

These are just some of the virtues that make Australia truly great, and we should all be thankful for them.

Yet as we begin 2021 the spread of COVID-19, intermittent lockdowns, segregated states and territories, joblessness, business closures, personal loss, social isolation and depression are threatening our virtues and damaging our collective wellbeing.

Shameful media headlines degrade our society. Stories of food hoarding, state government self-interest and (worst of all) of loved ones dying alone are highly distressing.

To make matter worse, many of our government representatives sadly remain fixated on their own election outcomes or distracted by petty arguments across party lines.

Where is the sense of community, the desire to aid our fellow Australians, governance with both rationality and compassion?

We are better than this.

Thankfully as a society we are able to combat the challenges we face, we can elevate our nation from the negative depths of COVID-19.

It is time to buy Australian, and then buy even more.

Together we can stimulate our economy by supporting individuals, businesses and companies alike. Support your local cafe, grocer, and restaurant. Seek out locally grown produce. Prioritise Australian-made. And buy Australian stocks.

Businesses may suffer earnings setbacks and operational missteps; they always do. Yet most of our great Australian companies will be setting new profit records in five, 10 and 15 years’ time. It is extremely likely that the stockmarket will move higher, perhaps substantially so.

Remember the Australian stockmarket has grown 6.5 per cent per annum for more than 120 years, despite World Wars I and II, the Great Depression, recessions, commodity shocks, the Vietnam War, the GFC and COVID-19.

By buying Australian stocks and backing local companies, we collectively support employment, industry, trade, and the economy. Thankfully, we also gain exposure to the returns that will be generated now and into the future.

So, buy a cross-section of quality Australian stocks, seek out a good financial adviser or investment manager, or buy an Australian exchange-traded fund. Invest regularly and don’t touch it. Allow our great nation and our great companies to deliver success. You may very well earn 6.5 per cent a year and nearly double your money in 10 years. It is time to pull together, support local, travel domestically, and bring back community.

Michael Skinner is a portfolio manager at Renaissance Asset Management. He is also a senior lecturer in finance at the University of NSW and the University of Adelaide.