The Economist has highlighted new trove of GDP data that reveals America’s recession to be much deeper than previously understood, and the recovery much more tenuous. Bloomberg says decline in German exports in June adds to signs Europe’s economy is losing momentum as the global recovery falters.
China looks robust, but is trying to rebalance its economy. As it does so, says the Wall Street Journal, small but rising number of Chinese economists are beginning to predict sharply lower annual growth rates – albeit at levels of 6% to 7% – over the next few years.
However, the Australian market looks more resilient than others and exports across the Tasman were credited with helping our manufacturing sector last month. The BNZ-Business New Zealand performance of manufacturing index slipped 1.1 points to 53.2 in July, but remained above the 50 level that separates contraction from expansion. Catherine Beard, Business NZ executive director for manufacturing, said local manufacturers had been enjoying the weak cross-rate with the Australian dollar, and there was ready market across the Tasman.
Australia remains our export biggest market. Receipts in the latest June year were valued at $10.3 billion, or 22% of total merchandise exports. That’s much greater than the $5.6 bn receipts from China and $3.9 bn from the US, our second and third biggest export markets respectively.
The head of BHP Billiton, Jac Nasser, is confident of Australia’s economic strength. “My own view is that Australians should feel quietly confident about our ability to manage through what is playing out in the northern hemisphere… quietly confident – not complacent,” he said. His message was reinforced by the IMF, which says Australia’s economy is well placed given strong outlook for commodities prices, although policy makers need to be wary of capacity and price pressures. IMF expects GDP to grow by 2% in 2011 and 3.5% in 2012, with the jobless rate remaining below 5%, although core inflation will likely rise above the Reserve Bank of Australia’s 2%-3% target band in 2012.
Sydney Morning Herald economics editor Ross Gittins is similarly upbeat. Compared with 1987, the sharemarkets in Wall Street and Europe really do have things worth worrying about, he writes. But he questions why the markets Down Under should take their lead from Wall Street. Australia has reoriented its economy away from America and Europe towards China and the rest of Asia. The price of BHP Billiton share should reflect the profit-making prospects of BHP – “and they’re still very good”, he points out.
