Be careful when buying a house. The Australian economy is more fragile than before the financial crisis
Adrian Blundell-Wignall, Director of Financial and Corporate Affairs of the Organisation for Economic Co-operation and Development (OECD), said at an Australian business economist event held in Sydney on the 30th that the global economy is still in danger and that the Australian economy is now suffering from the global financial crisis. Even more vulnerable when hit. More experts directly pointed out that Australia's biggest risk lies in its excessive dependence on China.
Unsustainable growth in emerging markets
The well-known Australian-born economist pointed out that day that emerging economies are constantly rising and now account for 50% of global production. Emerging economies such as China continue to lower the cost of currency and capital control, but this growth model is difficult to sustain.
Adrian said: "Imagine that in the future, if the OECD member countries only account for 10% of the global economy, and emerging markets account for 90% of the global economy. But 90% of emerging economies can drive 10% of the global economy with export-oriented growth. Global economic development? Of course not. Therefore, this model cannot be sustained. The only problem is to consider how to change this situation."
Australia's economy is performing well
Adrian said that when the global financial crisis comes, he knows that Australia is fully capable of avoiding the worst blow, but the economic growth of major economies such as China will inevitably slow down, which is a red flag for Australia.
Adrian said that the beginning of a rise in the dollar would also pose a danger to commodity prices. "At this stage, the growth of emerging markets in Asia may slow down, which is not a positive factor; at the same time, the US dollar has begun to rebound, and we can only expect the Australian dollar to continue to maintain its current strong level."
He also said: "Australia's economy is running well. We should not have such a low interest rate environment to help promote housing prices, but if there is no low interest rate environment, the Australian dollar will rise further."
The biggest risk is excessive dependence on China
Adrian's concern about the dangers of the Australian economy has been recognized by Standard & Poor's. The world's largest rating agency announced the Australian government's rating on the 29th.
Although Standard & Poor's still assigns Australia a 3A credit rating, the rating agency also warns of Australia's dependence on China, Australian banks' dependence on overseas loan financing, and the large-scale potential risks that the federal budget brings to the economy.
S&P analyst Craig Michaels pointed out in the report: “If Australia’s income and expenditure imbalances significantly widen beyond our expectations, or the terms of trade deteriorate rapidly and significantly, or the bank’s external financing costs increase significantly, we may Australia’s credit rating will be lowered. In addition, if the total Australian government debt rises to more than 30% of GDP after the new federal budget, we will also lower Australia’s credit rating."
In addition, Jeremy Lawson, chief economist at Standard Life, which manages huge assets, pointed out that when Australia is facing so many dangers, overseas investors are becoming more vigilant when investing in Australia.
He warned: "If there are changes in Australia's domestic interest rates, or if there is a shock overseas, especially in the Chinese economy, investors will very quickly change their views on Australia's prospects, and their short-term demand for Australian resources will also quickly cool down."
He said that Australia’s biggest risk does not come from domestic, but from its dependence on China, the country’s largest trading partner.
(The article comes from the Internet)