The graph comparing average returns from Australian and US shares is concerning. Vanguard says for the last twenty years Australian shares have made 7.2 per cent per annum compared to US shares on 11.8 per cent per annum. Compounding those rates produces a very big difference.

Australian shares outperformed in the 1980’s and early 1990’s. They also had a good patch from 2000 to 2007. The rest of the time they have lagged.

Most concerningly, US shares have done better than ours each year since 2013. Lonsec Research says over the last ten years the All Ordinaries has returned 9.3 per cent per annum while the global share average was 13.7 per cent and the S&P500 in the US made 14.5 per cent per annum.

The main sector driving returns when Australian shares did well was mining. When the world needs more raw materials and commodity prices are high, we do well. That’s our only competitive advantage. Yet simply digging up naturally occurring resources and shipping them seems basic.

Australia’s franking credit system has produced more focus by our companies on paying high dividends with tax credits. US companies prefer to reinvest more of their profits in growing their businesses, thereby raising their share prices.

Other factors are also holding us back. One is over-regulation. Multiple layers of approvals are required before any major building or project can start. Mining companies allow at least ten years from the discovery of a resource until they can start mining.

Compliance is a burden everywhere, ongoing. It has a big cost and, in some cases, there doesn’t seem to be much benefit.

Our shrinking productivity is an important factor. Output per worker per year has been declining since before Covid. Little effort is being made to correct this.

Unions are being allowed more power under the current Government, for example in the WA mining industry. That will reduce productivity further. Working from home, is not as efficient on average as working in the business premises. Studies show that WFH means lower productivity longer term.

The number of government employees in Australia has grown rapidly in recent years. Economists say the private sector is more efficient, flexible and productive than the government sector. More government employees means lower average output. Lower productivity limits company profits and share prices.

The new capital gains tax rules discourage risk taking and entrepreneurship, especially penalising business builders.

Sadly, investors should underweight Australian shares and overweight overseas shares, especially US stocks.