The World population has recently been noted as having gone past the 7,000,000,000 mark. Click here for more information.
By any measure, the population is growing rapidly. If you were born in 1960, then the population has grown from 3 Billion to 7 Billion. In our lifetime and in our children's lifetime, the growth has and will continue to have a significant impact on the world will live in.
The natural and unavoidable outcome of the population growth is that there is a greater demand for resources: food and commodities. If you are planning your investment profile between now and when you retire in 20 or 30 years, it is not unreasonable to be bullish resources. By then there will be at least another 2 to 3 billion people, all needing to eat and house themselves.
RBA Commodity Price Index 1982 to 2011
At the turn of the 21st Century commodity prices broke out of long term sideways price patterns, moving upwards. A sideways price pattern in an inflationary environment means that real prices were moving down. This scenario has now permanently changed.
Breaking down population growth patterns between countries highlights a greater stark change in the composition of wealth between countries. The early phase of this change may go some way in explaining the financial malaise now afflicting the developed world. What is happening now may just be inevitable.
Which countries are having the greatest financial difficulty? It would appear that it is most of the low population growth countries, ie the developed countries. It is clear that Asia and South America (anything south of Miami USA) have economic growth corresponding with population growth. In terms of growth and in terms of absolute population size, Asia is certainly the place to be. Paul Keating was on the ABC last night reminding us that we share our head of state, the Queen, with the UK and 15 other Commonwealth realms, and that our flag has an image of the British flag on it. For our politicians trying to define what Australia will be in the future, it is probably time to move away from being a protectorate of the USA and 'doffing our hat' to a bygone British Empire.
Australia's population growth since 1950 has been 175%, sitting in the middle between the old world economies and new world economies. The challenge, if the politicians can be brave enough, is to become part of Asia and form alliances (not just economic) in our region, rather than sit on the periphery as a supplier of raw materials.
The developed countries realised in the 1970's and 1980's that Asia was prepared to provide cheap jobs and cheap manufacturing in return for pieces of paper in the form of debt. It was a good deal for the developed nations who increased their consumption and lifestyle with gusto, piling up mountains of debt. Paper wealth, in theory, is a store of wealth. However, this idea is not as secure as previously thought as we are currently in the process of change. We focus on debt, but an equal part of the problem is that the growth of Asia has produced surplus savings, seeking a secure store of wealth. We are now in a process of trying to neutralise the damage of excessive debt in low growth countries, who are all embarking on austerity programs. Surplus nations,seeking more security will diversify their saving patterns. Looking beyond that though, Australia's future can be exciting. We are all looking to create wealth over the next 10, 20 or 30 years, and it is clear where our focus should be.