US downturn won't harm Australia: expert
A US recession would not harm Australia nearly as much as it would have a decade ago because of our strong economic ties to Asia, an economist says.
Nomura Australia chief economist Stephen Roberts said that while a US downturn would still be felt around the world, Australia's high volumes of trade with firmly growing Asian nations would shield the domestic economy from the worst of a double-dip recession.
"Our direct export exposure to the US is about half what it was 10 years ago, while our direct exports to Asia are now well over 70 per cent of our total exports," Mr Roberts told AAP on Friday.
"In Asia we have some of the best fiscal positions in the world, there's plenty of policy capacity for Asia to boost its domestic spending and there has been a rebalancing in some of the biggest economies over there towards domestic demand.
"So it suggests a US downturn is still important, but of much less importance than it once was."
Mr Roberts comments came one day after Reserve Bank of Australia (RBA) assistant governor (economics) Philip Lowe said the nation's economic future would be closely tied to China and India, and not the US.
"A decade or so ago, we spent a lot of time puzzling over why quarterly movements in Australian GDP were so highly correlated with quarterly movements in US GDP," Mr Lowe said in a speech in Sydney.
"We don't puzzle over this anymore - not because we solved the puzzle, but because the correlation has fallen.
"At the same time, the correlation between quarterly movements in Australian and Chinese GDP has steadily increased.
"Clearly what happens in the Australian economy is now more dependent upon what happens in China than has been the case at any time in our past."
Since the depths of the global financial crisis in late 2008 and early 2009, the economic performance of the US and Australia have diverged considerably.
The US jobless rate is currently near 10 per cent, more than double pre-crisis level.
By contrast, the official unemployment rate in Australia at 5.1 per cent, having peaked last year at 5.8 per cent.
The Reserve Bank of Australia (RBA) lowered its benchmark cash rate to a 49-year-low rate at three per cent during the global financial crisis in an effort to stimulate the economy. It has since risen to 4.5 per cent as the economy improves.
The US Federal Reserve has kept its target cash rate at 0.25 per cent since December 2008 and is now considering quantitative easing whereby it increases the supply of money by increasing the excess reserves of the banking system.
However, another crippling US downturn is far from a certainty.Link -
http://news.smh.com.au/breaking-news-business/us-downturn-wont-harm-australia-ex...============
A lot of what had been said was reasonable, until the last sentence.
Yes, the Australian Economic ties to the USA have lessened and our ties to China have strengthened.
However, the USA affect on China, most of S/E Asian & the world is still massive and the flow on effects to Australia will become apparent, if the USA re-enters an Economic slowdown.
The fact is that the USA has not escaped the GFC, it simply substituted falling GDP for rising Debt, on a temporary basis, in a Keynesian attempt to fix what can not be fixed.
Demand has started a long term decline, due to a number of factors, including Global Population Aging & subsequent actual decline, but also Peak Energy & Peak Debt.
The USA Economic decline WILL RESUME, it is only a matter of when, not if!
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