The Australian economy has boomed in recent years. Much of this growth is owed to the fast-economic acceleration of China. The economy has racked up over 103 quarters of successive growth. The requirements for its exports from the rapid industrialization of China has been a key driver of growth for its economy. It’s not just the demand for its raw materials however that have seen the economy soar. As China has grown, so to, it’s population has demanded the trappings of an ever more industrialized society. Increasingly Chinese consumers have become more demanding and eclectic in their wants and desires. Soft commodity exports from Australia to the Chinese mainland have also soared. Once such beneficiary is the Australian Wine industry. At last count, it was growing at 50% a year. It seems Chinese consumer cannot get enough of what the Aussies can offer. While the London Forex open maybe the busiest time on the financial markets, it sees little trading in the Yuan. Instead the Chinese currency tends to be most heavily traded during the Asia market session. Nevertheless, traders are keen to keep an eye on movements in this currency. They are also increasingly watching the Chinese economy for signs of cracks. In particular, other regional markets such as Australia, New Zealand and Japan are increasingly looking for changes in policy. The fear is the knock-on effect that any failure could have on their own economies. The Austrian dollar has remained remarkably resilient in recent times. While its fortunes are relatively linked the strength of its neighbours, the continuing growth figures have helped to shore up it’s worth. The question of course is as to whether the economy can keep growing at its current pace. Many commentators are now calling for a slow down over the coming months. Current growth figures are slowing down. The latest annual rate of growth is listed as 1.7%. Not a bad figure but still the slowest rate for 10 years. Debt levels of the average household have also increased. They now stand at the worst since the financial crisis. So, the figures don’t look good for the future. What is key however, is that the Australian government has scope to increase the level of stimulus if needed. Interest rates on the currency stand at 1.5% and government debt levels are relatively low compared to many Western peers. However even against this backdrop stocks may struggle to show gains unless it’s neighbour can continue to show growth. Without foreign demand for its commodities the growth story will end. The domestic economy does not look in good shape. Banks make up nearly half the index and therefore the market is vulnerable to any financial crisis more than most. The country will certainly not be able to stand up well on domestic demand alone. Consumers are increasingly squeezed and domestic consumption will be hit hard in the event of a sell off. Any shock will see both the Stock Index and currency hit particularly hard. Certainly, there is an increasing view that the economy will suffer. While the view has been around for a while it is gaining traction. Of course, it may be part of a wider global sell off or crisis. Whatever the trigger, Australia looks to be in a position to be hit particularly hard. Any fall out will likely have severe longer term ramifications. This video offers an interesting insight into the potential fate of the economy. If it plays out then the Aussie dollar is sure to head south a lot quicker than many might think.
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