Has Australia rested on its laurels for too long?
During the global financial crisis, Australia’s economy defied the global trend, continuing to grow, as the world watched with envy.
Australia’s interest rates were among the highest in the world, as our resources sector propelled our economy, despite signs other sectors, like retail and manufacturing slowed.
But is the shine on our resources sector, starting to dull?
Today, China swung back into a trade surplus, at US$5.35billion in March. That’s good news right?
ANZ notes that the result beat market expectations, suggesting external demand conditions have continued to improve.
Export growth came in at nearly 9 per cent.
Analysts at IG Markets say, the result allays some fears of a complete collapse in European demand.
The concern however, is a 5.3 per cent rise in import growth. The market had expected a 9 per cent rise. IG says, that suggest a slowing in demand for Australian comodities. It goes on to say, that if export revenues slow because of weaker Chinese demand, it could leave a larger than expected hole in the national budget. On the flip side that may encourage the Reserve Bank to cut interest rates here.
A closer look at the numbers from China, shows that for the first quarter of 2012, iroe ore imports fell by just over 8 per cent impacted by the price effect. ANZ however, notes that iron ore import volume, acutally increased 6 per cent. While on the surface, the numbers look good, they are for the quarter. The latest statistics for the month of March, shows some weakness.
China’s trade figures come as the debate over Australia’s business and trade relationship with Asia intensified.
A recent submission by the Business Council of Australia gained media attention today, which noted that Australia is not moving fast enough to lift productivity and enable improvements in the competitiveness of industries already deeply engaged with Asia.
Its report, titled Assessing Australia’s Trade and Investment with Asia calls for economic reform to attact finance and investment in Australia and to reduce barriers to trade and investment in the country.
The BCA is also warning that Asian economies have turned their attention away from Australia for resources and energy.
The higher Australian dollar is already causing concerns, but other players say taxes, like the Mining Resource Rent Tax will see investors look elsewhere.
Billionaire miner, Clive Palmer said today, that Australia’s Foreign Investment Review Board is acting as a disincentive for investment in Australia, sayinfg that its drawn out processes was a deterrent to foreign investment.
Speaking on ABC Radio, he said that the other miners like Gina Reinhart and Andrew Forrest seemed to be more responsible for Australia’s solid economic performance.
It comes as NAB trimmed its economic growth forecasts for Australia, from 3.25 per cent for this year, to 3 per cent on fears the country’s unemployment rate will rise to 5.5 per cent by the middle of this year.
It’s blaming a Chinese slowdown, weather disruptions and mining strikes.
The question now, is for how long can Australia ride the commodities boom wave, and does it have to readjust its expections, if China does indeed look elsewhere for its energy needs.