Australia's Economic Slump Seen As China Faces Property Woes
The Australian economy may be on the verge of plunging into a "danger zone" as the property crisis in China worsens. According to the country's former chief economist Quentin Grafton, Australia's economy may face a downturn in 2015. Reports said Australia's export income is expected to get its biggest hit from the Chinese economy slowdown in more than 20 years.
Grafton, also the former head of Australian Bureau of Resources and Energy Economics, declared that China's economy appeared to be "unravelling." He cited Australia's declining business investments, highly priced housing market, falling prices of coal made worse by a high dollar had put the Reserve Bank of Australia in a tough situation.
He said Australia may be in for a "difficult ride" when significant economic factors will work against the country. Grafton added that he was only looking at the risks and the numbers. He said there was no doubt that Australia is in "clear and present danger."
Grafton's statements echoed the general sentiment at China's economy with investors afraid to put money on the table because of the country's property market currently on its lowest slump on record. Economists said the average price of new homes in China has been falling for months. Latest figures have brought the average house price at $1737 per square metre.
Export incomes in Australa fell between in 2012 and 2013 which made it the first time income had declined in two years. Australian economists believe that the falling commodity prices in the last few months have affected the terms of trade.
The latest income data from the Australian Bureau of Statistics caused independent senator Nick Xenophon to be worried about the lack of a unified plan among politicians on boosting the economy. The Australian Financial Review reported that the senator described Australia as "in denial" and declared he did not want his country to turn into the "Argentina of the 21st century."
Global market research group Nomura said the Chinese government must intervene to prevent its country's economy from further sliding in negative growth. Australia's economy has a direct link to China's property crisis. The construction of residential property in China relies on iron ore produced by Australia. The price of iron ore has dropped dramatically to its five-year low because of declining demand and oversupply issues.
