Chillin' out till it needs to be funded
With U K landing Sterling Pound (GBP) 557 mln of Australian Gold, and the Australian $ running to $1.0 8 before ticking down today, the Australian trade surplus of A$2.33 bln is in the danger of leaving the Australians high and dry in the midst of the floods engulfing a lot of the resource rich country. Continuing power deficits in China however make it unlikely that custom from China (worth A$8.9bln in May incl imports) would go down any time soon.
China’s manufacturing has in the meantime slowed down with the composite PMI at 51.6 (MarkIt release of today) and the Services PMI much higher at 55. As commodity prices show up the demand deficit in falling prices, Australia may again continue to run a robust trade bill as it did in 2009 in the midst of a global recession. The Aussie thus has no intention to go below par values against the Dollar and is in the likely danger of becoming like the Sterling in UK US trade which is globally not as significant as others like the Yuan but remains high to keep the domestic economy challenged. Though that is a stretch to start with, that thinking is probably aiding along, tight monetary policy despite a low 4.9% unemployment and no visible signs of slowing down. IT is alsoa creditable move considering the riches are mostly resource led and will not likely translate into other hegemony in Services or Manufacturing in the foreseeable 50 years.
The Australian mining story continues to be strongly oriented towards India and China for mining resources esp with a lot of Coal plays landing in India’s hand before govt anointed prices for the same. With a strong resource economy an unemployment rate of 4.9% should not faze Aussie bankers but tight monetary control continues to be a priority and with surpluses like this $2.5 bln in May here is more that needs to feed this Economy. Inflation in Australia is in tune with that of US and European Economies at under 3%. However fruit and vegetables continued to contribute 6.8% in June 2011
The suspected wage growth and inflation has been slow and is unlikely to be a big threat for Australia though it has already brought the desired manufacturing contraction in China. In China also, Services sector and loer unemployment signal growth will be in check but at 43% of GDP Services are likely to keep the GDP ticker up as also bring in larger FDI for the region
This is an exploratory article to aid our search for a more durable Australian and Global Economic miracle. Despite Central Bank assertions rates have been mostly on hold despite the rise in the currency, the super tax, the government controlled prices and the natural disasters impacting the Aussie economy in the last 18 months to 2 years. Apart from dangers of food inflation consumer sentiment and retail sales also continue a downtrend under the pressures of a resource economy without effective Services and manufacturing growth.
Australia’s exports of $28 bln ( A$26.9 bln) compare well with India’s $25 bln in May led by demand for iron ore and Australian Gold in the UK in May. Consumer goods imports are one of the few growing imports categories and Services sector a robust contributo to exports