Slowing demand for commodities pose an increasing threat to the nation’s economy.
According to Access Economics, the health of Australia’s economy hinges on that of China – whose strong demand for coal and iron ore has contributed enormously to Australia’s national income.
With China’s economy set to slow, Access Economics has warned that this could be largely detrimental to the Australian economy.
“To repeat an old refrain, Australia is fine while China is fine. Or, to sit that on its head, if China stops being fine then Australia runs the risk of being buggered,” Access Economics’ Business Outlook released today said.
Access Economics has forecast China’s GDP for 2009 to be 7.4 per cent – compared to 11.4 per cent in 2007.
With this in mind, Access predicts that the RBA will reduce the cash rate to five per cent in coming months. Should China’s growth decline further than anticipated the company said rates would fall even lower.
Any significant fall in commodity prices would be particularly detrimental for resource-rich state economies such as WA.
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