Sunday, April 03, 2005

"A Few Tough Years" Ahead In Australia

The predictable fallout from the housing bubble is everywhere in Australia. "Who's to blame?" rumblings are everywhere as "the economy (is) in for a few tough years."

"NSW is leading the national downturn because falling house prices are hurting it on several fronts", reported SMH.com.

"Its [the Reserve Bank's] late 2003 rate rises pricked the housing price boom. Within months retail spending hit the wall and housing construction started shrinking as a share of the economy. Both those developments were necessary, but they also slowed economic growth sharply."

4 Comments:

At 12:11 PM, Anonymous Anonymous said...

Surely the Aussies are in much better shape than us.

The RBA can probably reduce interest rates by 350-450 basis points to give their economy a soft-landing as the housing bubble deflates.

This should also weaken the Aussie dollar sufficiently to correct their current account deficit.

And their stock market is still near all-time highs.

 
At 3:39 PM, Anonymous Anonymous said...

The Aussies are in better shape than us because they can feed, cloth and heat/cool themselves. The are rich in natural resources so they will survive and most likely prosper. Doesn't mean that their housing market isn't going to correct though.

 
At 10:00 PM, Blogger Ben Jones said...

The fact that so many countries are experiencing bubbles makes me think the recession/depression will be global. Australia won't be spared, sad to say. My opinion...Ben

 
At 6:52 AM, Anonymous Anonymous said...

Actually, the RBA is in a bind - it can't afford to push down rates since this will further encourage inflation, which is also being exacerbated by rising oil prices. A falling Aussie dollar would also unleash the inflation beast.

Whatever the RBA does or doesn't do, it will surely have big consequences. Furthermore, the Aussie housing market has risen substantially more than the US market (and more broadly).

 

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