Australia to Suffer a Major Blow because China’s Unravelling Economy
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Resources expert for the federal government, Quentin Grafton, has suggested that the iron ore price will continue its rapid decrease as the economy in China begins to show clear signs of unravelling, leading to serious problems for Australia. Speaking at a recent conference, Grafton announced that the price of iron ore was unlikely to see a quick recovery, which will result in a painful drop for Australia’s 2015 economy.
Resources expert for the federal government, Quentin Grafton, has suggested that the iron ore price will continue its rapid decrease as the economy in China begins to show clear signs of unravelling, leading to serious problems for Australia. Speaking at a recent conference, Grafton announced that the price of iron ore was unlikely to see a quick recovery, which will result in a painful drop for Australia’s 2015 economy.
As a result, it is being recommended that the Reserve Bank of Australia should prepare for a particularly difficult future, since the high dollar and overpriced property market creates a challenging economic environment following the slow-down of iron and coal prices.
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The Problem Starts at Home
The comments that Mr. Grafton gave echo alongside an increasingly growing number of people voicing their concerns about the Chinese economy. Investors are showing serious signs of concern as residential property in china experiences its worst fall on record, after the price of new homes has decreased rapidly over the past few months:
* June – 0.5%
* July – 0.8%
* August – 0.6%
Property market problems are a serious issue for the Chinese economy, as well as the community of global investment, since the property sector is essential to driving economic growth, contributing to around 15% of China’s 2013 GDP. Analysts have suggested that real estate issues make up the center of confidence-related problems for China. This is leading towards a grim prediction of future growth. More Americans would care about China if China stopped spying on America and stopped being aggressive with their military in the South Pacific.
Help from the Government
A research group for the global market suggested that the Chinese government would need to intervene if they wanted to prevent a decline in economic growth. By tracking various Chinese economic indicators, such as credit-card activity according to the month, this research group found that a reading of 71% had fallen to 52% by July.
Various reports which have been published suggest that targeted government policies will be required to save China, however intervention of this nature is unlikely to take place. Unless there is a sharp collapse in property investment, it is unlikely that the Chinese government will do much to loosen its policy on credit.
The Iron Link
The property market issues that China are currently suffering with are said to be directly linked to the Australian economy. This is because the residential property arena of China is a leading consumer of iron ore, which accounts for approximately $1 of every $5 spent on Australian exports.
Since the oversupplying issues and various other problems have led to a dropping demand for iron ore, as well as a price that is lower than anyone has seen in over five years, the price of iron is currently hitting about $84.38 a ton in US currency. According to experts, if the numbers were to drop any lower, then Australia may begin to see an iron ore price closer to $76 a ton. This is nothing to smile about since this rate has not been seen since 2009.
