Mainly in a debt inflated and highly over-leveraged housing bubble that is finally deflating. This deflation will erode much of Australia's wealth.
The next most important storage of wealth is Australia's bloated super funds with almost $1.5 trillion invested mainly in shares that would selloff in the event of a financial crisis anywhere in the world (eg. an escalation of the European debt debacle).
Finally, Australia's economy has become increasingly reliant upon resource exports - a sector that is notoriously cyclical at the best of times. This is not the best of times. A stalled recovery in the US, UK and Europe would continue to drag on global growth but the real threat to Australia is an increasingly likely slow down in China. I can envision the commodity bubble deflating with global financial markets in general. Unlike the RBA and many pundits, my outlook for Australia is far from rosy. Safety is key as the years ahead may prove not to be about return on investment, but return of investment.
