Slowing China's growth to impact Australia's economy, economist says
24/10/2008 17:07
China's slowing growth will affect the Australian economy as demand for
coal and iron ore fall and prices tumble, Access Economics director Chris
Richardson said today.
As a consequence, the Australian government may need
to run a deficit budget temporarily, he told ABC Radio.
"The problem for
Australia, as markets fall, share markets, property values fall in China and its
construction weakens off, that's weakening the demand for steel," he
said.
"Australia's risk is that we sell the inputs that become Chinese steel,
coking coal and the iron ore."
Richardson, speaking following the launch of
the Access Economics quarterly business outlook, said spot steel prices were at
US$1,200 a tonne in July, but had slumped to US$255 a tonne now.
That
suggested a notable fall in prices was likely when Australian suppliers
renegotiated contracts. Such a fall would not hurt growth rates as much as it
would hurt income.
"Our problem is that at least some of that is about to
unwind. We have already seen the weaker Australian dollar. I suspect that the
next step is that as commodity prices fall, profits in Australia will fall, not
just for the miners, but across a number of sectors," he said.
"Eventually,
not straight away because it will take time, engineering and construction demand
will weaken and this will hurt the federal budget."
Xinhua
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