The glass-half full mantra of Australian economic insiders goes on today with Alan Mitchell at the AFR and his assessment that China is just fine:
…when it comes to China, Australian chief executives now seem to have their heads permanently wedged between their knees.
I guess it’s hard to feel very optimistic when iron ore prices are dropping like a stone, and the decline in the terms of trade is adversely affecting mining profits and the federal budget. But exaggerated fears of a recession in China and its impact on Australia economy almost certainly are affecting business confidence and investment across all sectors of the economy.
…The key new growth engine is the services sector, which has been stunted by China’s strong bias towards industrial investment and the inefficiency of government-owned service sector monopolies.
And? What good is that to Australia? There’ll be some more tourists and students and that is it. Laughably, hilariously, short of what will be needed to make up for the $1 trillion in forward commodity revenues (according to GS) that’ve gone up in smoke in the past 12 months. Arguably, Australia would be better off if China had a hard landing and then threw the kitchen sink at stimulus for one final wild building party.
For Australia, a soft landing in China, with the rise of services sectors, higher consumption and powering net exports as commodity imports plunge, is every bit as bad as the hard landing scenario. The only difference is timing.
Perhaps business leaders realise what Mitchell does not, that if China’s rebalancing fails then Australia’s structural adjustment to greater mining output is screwed, whereas if China’s rebalancing succeeds then Australia’s structural adjustment to greater mining output is only rooted.
