Posts Tagged ‘CommSec National Performance Gauge’

Hoodwinked by Craig James’s “CommSec National Performance Gauge”

Thursday, March 25th, 2010

Just this week, CommSec’s Chief Economist, Craig James released a CommSec National Performance Gauge that purportedly declared that Australia have never had it so good (as at end of 2009). According to this news media article, Craig James was quoted as saying,

The CommSec National Performance Gauge attempts to fill the void by focusing on issues that matter to ordinary Aussies. That is, financial decisions like buying a car or house, filling up the car with petrol, the state of the job market, wages and confidence levels.

That gauge takes seven measures, of which four of them involves spending capacity. Among the four, one of them is on car affordability. As that article reported,

The gauge shows that car affordability is the strongest in 35 years, taking a person on the average wage just under 30 weeks to buy a new Ford Falcon, down from 36 weeks five years ago.

The idea is that as the number of weeks an average worker earns to buy a car decreases, the ‘better’ and ‘more’ well-off’ this measure indicates. A car is probably chosen because it is representative of the material well-being of Australians. According to our friends at FN Arena (please note that the original article has an overall air of sarcasm against Craig James’ gauge),

But in the wider cohort, income per capita is up 6% over five years and retail spending up 7%. Today it takes 30 weeks of average wages to buy a new Falcon, down from 36 weeks five years ago and the most affordable level in 35 years. It takes 1.58 weeks of average wages to make one average mortgage payment, which despite ?unaffordability? cries is the same level of five years ago. And despite rising oil prices, drivers can afford 7% more petrol from the average wage than five years ago.

That sounds correct right?

Unfortunately, if you’re not careful, you can fall for a mental pitfall here. Even Craig James was reported to qualify his exuberance by saying, “that is probably a big call and one that would attract a lot of discussion.”

So, what is the mental pitfall trap hidden within this performance gauge that can lead you astray?

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