Think thrice about abandoning the ASX

Australia’s economic weaknesses do not justify abandoning the ASX because households, public finances and smaller-company valuations provide greater resilience than the headlines suggest.

• Australian house prices are elevated relative to household incomes, mortgage repayments have risen and consumer sentiment is near all-time lows, but households have already reduced spending and built substantial net wealth.
• Aggregate financial and dwelling wealth is more than five times outstanding household debt, implying an overall loan-to-value ratio of roughly 17%; household debt relative to disposable income has also declined over the past decade, while net savings are historically high excluding Covid.
• Australia’s gross government debt is estimated at about 51% of GDP, compared with roughly 102% in the UK, 119% in France and 126% in the US; its 2027 general-government deficit is expected to be around 2% of GDP versus about 3%, nearly 5% and more than 7%, respectively.
• The ASX is not a direct proxy for the Australian economy because many listed miners and large technology and healthcare companies earn more revenue overseas; meanwhile, JB Hi-Fi’s share price has fallen 27% in 2026 and the Small Ordinaries Industrials index has declined 18% over 12 months.
• Smaller Australian companies are priced more cheaply than large caps: the ASX Small Ordinaries Index trades at around 12 times earnings, versus about 16 times for the ASX 200.

Takeaway: Investors should not automatically avoid Australian equities because of weak consumers, falling house prices or slower growth; the author argues that the ASX should remain a core allocation, while acknowledging that Australia may still face economic difficulties.