Tag Archives: two-speed economy

Foreign Investors Spooked, See Risks Down Under

28 Jun

From the Sunday Telegraph:

Greece isn’t the only country giving investors the jitters.

While Australia’s challenges pale in comparison to those currently plaguing the debt-laden European nation, they are still spooking foreign investors who are taking their money out of our share market and running.

According to the national accounts, released this week, foreign investors sold $1.9 billion of Australian equities in net terms in the March quarter. This compares to the December quarter where they bought $28.5 billion of equities.

Economists believe foreign investors – the bulk of whom come from the US and increasingly Asia – are seeing Australia as a risky option for their cash due to concerns over our minority government, to interest rate rises and the carbon tax.

Concerns about a two-speed economy and the housing market are also scaring off overseas investors, according to AMP Capital chief economist Shane Oliver.

“There has been a lot of commentary from overseas that foreign investors are worried house prices here will drop and that that would adversely affect our banks and consumer spending,” he said.

“What also worries them is that a minority government means less certain policymaking. “On the carbon tax, they are concerned it could be implemented in a way that may adversely affect Australian mining or coal companies compared to say mining companies in other countries or that it may be too heavy-handed and adversely affect the economy.”

Mr Oliver said the jitters from foreign investors had contributed to the Australian share market under-performing global markets of late.

“Global shares have had a correction of about 7 per cent whereas our market has had a correction of around 10.5 per cent,” he said.

“You have this messy global backdrop, but because Australia has its own issues our market has come down a bit more than global markets.”

Mr Oliver said investors had been playing Australia more through the high dollar than the share market.

Foreign investors upping sticks was a wake-up call to the federal government, particularly on the carbon tax front, [Commsec economist] Mr James said.

Digging A Hole For Ourselves

5 Mar

From The Age:

In a series of speeches in recent days, senior economic officials from Reserve governor Glenn Stevens down have spread the same message: the brief interruption of the global financial crisis is over, and Australia has gone back to where it was – into a resources boom so big it will dwarf the booms of the late ’60s and early ’80s.

The Reserve Bank’s best and brightest argue that this will be good for Australia because it will allow us to earn more income now than we would if the minerals stayed in the ground for a few more years.

With the greatest respect, I sharply disagree. I think we need a national debate on whether it really is in our interests to try to sell off our mineral wealth as rapidly as possible, as our economic leaders believe…

We need to think hard about this. The implicit argument from our officials is that we should allow otherwise-viable industries to be put down in the interests of making room for us to extract as many minerals now as possible.

This is wrong: not just because they are picking winners, or just because China, too, has its vulnerabilities and could fall, but because you don’t put all your eggs in one basket.

We need to keep a mix of strong, diverse industries to guarantee our future. We need to debate how we do that, and learn from how others do it.

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