Is there a concern Down Under about the euro?

Australian expats concerned over financial implications of euro crisis

28,6% expats in Australia sure the euro will never fail

The euro is certainly the hot topic at the moment with many people around the world concerned about the issues currently developing within Europe. This is certain to have an impact upon other areas of the world and expats around the globe although our online poll at the expat forum has given people the opportunity to put their views and comments forward. It does give an interesting insight into how expats around the world perceive the European problem and how they expect the issue to impact them.

There are some experts who are struggling to get the point across with regards to the euro and the fact that it is not just a European issue. If the euro was to fail then the consequences across the world would not bear thinking about. Therefore, gleaning information about the opinion of expats around the world gives us a very useful insight into how the problem is perceived.

Asked about the potential risk of euro falling, participants in the poll run by Expat Forum on behalf of Barclays Wealth and Investment Management, nearly a thirty per cent of respondents show a strong confidence in euro’s survival.

The number of votes polled by expats in Australia suggesting that the euro would never collapse is under the average for the poll as a whole. At just under 29% it seems there is growing concern from expats within Australia that the euro is in trouble and their lives may be impacted financially. The very fact that Australia is currently enjoying something of a boom time economy would on the surface appear to suggest the introduction of a ‘feel good factor’ although this vote would suggest otherwise. Whether some of the difficulties within Europe, and the potential solutions, have been lost in translation across the world to Australia may have been a consideration in the past but with the Internet we have newsfeeds available 24 hours a day from all corners of the globe.

The interesting factor in relation to expats who are living out of Europe is that you would expect them to have a more balanced approach and a more balanced opinion. However, there would appear to be above-average concern regarding the euro from expats living in Australia although many may well be panicking because of their euro denominated savings and income. While some of the more pro-European elements of the European Union appear to be spreading words of confidence about the euro in the longer term, other countries with no axe to grind in any way appear more balanced in their understanding of the situation.

It may seem to many people that the opinion of those thousands of miles away from the European problem may not matter as much as those more directly involved in the situation but this is not really the case. The confidence factor which has prompted the fall in the value of the euro is a worldwide confidence factor and not specifically connected to Europe alone. It is the opinion of all investors around the world which will ultimately dictate the path of the euro in the future and despite the billions upon billions of euros thrown at the problem by the European Union, confidence will always come first.

Yes, it would affect my savings back home (19.05%)

Of those Australian expats who voted in our online poll at the expat forum 19.05% of them believe that a collapse in the euro would affect their savings back home. This would indicate, as we have known for some time, that Australia has been and continues to be a very popular destination for European expats. It is an area of the world with very strong connections to the UK and at this moment in time it is an area of the world which is very much on the up. The overall vote by those who believe the euro will affect their savings back home was slightly higher than the Australian figure at 20.59%. However, this margin is minimal and it seems all expats living in Australia are of the same opinion as the vast majority of those who voted.

The issue of savings and income streams from your former homeland is one which we have covered on numerous occasions but one which reappears on a regular basis. Those not so heavily involved in the expat market might automatically assume that those looking to move overseas for a new life, a long-term new life, will effectively cash in all of their chips and all of their assets and transfer these to their new homeland currency. Surprisingly, the evidence which we have gathered from this online poll suggests otherwise and it seems more and more obvious that many expats very rarely let go of their former homeland completely.

However, the situation may not be as straightforward as one might assume because if you have assets which you are unable to sell in the short term or perhaps income streams from pensions or benefits, these will remain in your former homeland currency. While the question which we asked was in relation to savings, many expats will include their assets and their pension/benefit payments as their savings of the future. The reality for those with direct exposure to the euro is that there will be a detrimental impact upon the value of their savings if the currency was to collapse. For those with exposure to say for example the UK pound the immediate aftermath would not be as shocking in the event of a catastrophic collapse.

No, I use a FX tool of any kind to make the most of currency volatility (9.52%)

The issue of financial tinkering using such things as foreign exchange tools is something which historically was very much in the domain of professional financial advisers and investment managers. However, the onset of the Internet has opened up an array of new markets and more and more people are now willing and able to make use of financial instruments which they would never have even known existed in the past. The use of foreign exchange tools by expats in Australia appears to be around about the average for the overall online poll although possibly higher than many would have expected.

If you were to mention the subject of foreign exchange tools in relation to currency investments the vast majority of our readers would assume this was some form of instruments available to encourage speculation on foreign currency markets. However, while yes, many people will speculate using these tools, they can also be used in other ways as well. Hedging or insuring your assets is a term which many expats may not have even considered even though many of them they are “gambling” with their life savings and their assets with a move to pastures new. Especially in the current volatile currency markets there is an opportunity to protect your assets from major erosion in the short to medium term in the event of the collapse of the euro. If you think about this type of investment tool as an “insurance premium” then this will give you an idea of what is available.

On the other hand there is no doubt that more and more investors are looking to play the currency markets during the current times of major volatility. This is all good and well if you have money to spare and you make the right calls in the short, medium and longer term but if you are gambling with your life savings and your future overseas, is it really worth it? Sometimes there can be too much information made available to private investors many of whom will at some point begin to believe their own hype and avoid the advice of professional financial advisers. This would be a major mistake!

Whether you’re looking to invest your life savings for the long-term, looking to reorganise your assets or even looking to insure your finances via the foreign exchange market, you really do need to take professional financial advice. True, it may cost you a few hundred pounds in charges, it may take some time to put together but if you’re looking for a long-term life overseas then surely a few more weeks or months is not the end of the world. There is a growing problem with regards information readily available on the Internet in relation to very complicated financial instruments such as foreign exchange tools. It all looks very easy when you check the graphs and the buy and sell notices appear to make sense but this is all very easy in hindsight.

Yes, it would affect my purchasing power (38.10%)

Surprisingly it seems that a lot of expats in Australia are becoming more and more concerned about their savings, their income and the effect which a collapse in the euro would have on their purchasing power. This would seem to indicate a large majority of the expats who took part in our online poll are from euro denominated countries which would be directly impacted by any collapse. When you take into account currency exchange rates after a collapse in the euro many expats living in Australia could be in dire trouble if their assets and their incomes were in the ailing currency.

However, while many expats who arrived in Australia from non-euro countries may well believe that there own circumstances will not be impacted by a collapse in the euro this is not true. Without wishing to push forward a doomsday scenario, if the euro were to collapse then every corner of the world would be impacted because of the knock-on effect on financial markets. When you take into account the large number of overseas investors with funds in Australia it is not difficult to see that Australia already has a significant indirect exposure to Europe.

Current headlines in Australia very much favour China and India as the way ahead for the country because China and India are still very much enjoying boom times and their need for natural resources such as iron ore and coal is enormous. Even though this exposure to China and India may well offset part of any downside to a euro collapse, do not be of the understanding that Australia would escape scot-free. It is in the best interests of all governments around the world to pull together and not only assist with a solution for the European problem but also to erect firewalls and lenders of last resort to the global community.

An easy shortcut to protect and manage your wealth without losing sleep because of the euro’s struggles is to pen an offshore bank account.

Other reasons (4.76%)

The interesting thing about this online poll is the fact that we are able to give those with other concerns the chance to step forward and put their point of view. There were limited “other reasons” which came forward from the Australian expat community but one which is worth noting is the following: –

Can’t wait for the euro to collapse

Whether this is a tongue-in-cheek comment or meant as a throwaway joke is debatable but if it is a serious answer to a serious question then we should be worried. As we touched on above, any collapse would have an impact not only within Europe but right around the developed and the developing world. There is no area of the globe which would escape unscathed and there are no individuals or companies around the world who would benefit in the long term.

The Ozzie panorama

As we touched on above, the Australian economy is still very strong and indeed it has emerged from the recent double worldwide economic downturn as one of the strongest economies in the developed world. Even though the economy is heavily dependent on natural resources at this point in time, especially China and India, there is a feeling that the economy is slowly but surely expanding and bringing in more new businesses and new opportunities. However, in the short term there is growing concern that this overdependence on natural resources and a relatively select few export partners could be detrimental to the economy.

Putting aside the economic debate for a moment, Australia has always been a very interesting part of the world for the expat community and indeed the very strong relations with the UK continue today. The number of expats in Australia continues to grow and economic growth is attracting more and more skilled workers to the region. Indeed only a few days ago we saw one of the more prominent politicians in Australia stepping forward to confirm visa changes which would effectively make it simpler for skilled workers to apply for full-time residency in the country. This is perhaps the biggest non-cash investment in the Australian economy because these workers can pass on their skills to the next generation of Australian workers.

The only potential fly in the ointment with regards to Australia and its economic growth in the short to medium term is the up-and-coming election of 2013. The current Labour government is under severe pressure and indeed after losing the support of some minor parties it now has just a one seat majority in parliament. There is no doubt there will be a change in economic policy if, as the opinion polls seem to suggest, the Australian Conservative party is successful next year. What type of changes remains to be seen and what short-term impact they have on the economy is also unclear.

However, there is one thing which is abundantly clear within the Australian community and it is the fact that immigration is for many people the number one concern. More and more people are arriving on the shores of Australia with incorrect documentation and indeed many are seeking asylum from terrible lives in their former homeland. This is placing pressure upon not only public services but also the employment market and indeed the Australian government recently announced the investment of billions of dollars into the immigration system. If you have something to offer Australia then you will be welcomed with open arms but for those seeking solace from a former life the situation seems to be very different.

Conclusion

Looking at the Australian poll and the overall poll we can see that Australian expats are less confident that the euro will survive, more concerned about the impact on their purchasing power and hold a relatively average position regarding the impact the euro might have on their savings back home. It is interesting to see the view from expats further afield than European entities using the euro because you would expect a more balanced approach and opinion. However, whether or not the vast majority of expats have direct or indirect links to Europe there seems to be a growing concern about the future of the European currency.

The reality is that if the euro was to collapse this would be disastrous for not only Europe but also the rest of the world. Taking a major element out of the worldwide economy would cause havoc, confusion and major distress for many investors, businesses, governments and individuals. The truth is that we cannot afford the euro to collapse, especially after the recent investment of billions upon billions of euros into various bailout funds, because we would quite literally be looking into the abyss.

Make no mistake, we are experiencing one of the darkest and potentially most damaging financial meltdowns the world has ever seen. Whether the euro will recover and survive remains to be seen but there are certainly challenges ahead.