The market largely ignored the upgrade of BHP Billiton (NYSE:BHP) by Deutsche Bank (NYSE:DB), punishing the stock in New York as continued concerns over demand for raw materials in a shaky global economy continue.
Add to that the unsurety of the super tax in Australia and there's a need to settle things down to get a better picture of where they are going, especially with external forces like the Australian government acting upon them.
For the upgrade, it was from a "Hold" to a "Buy." On June 16, JPMorgan went the opposite direction with BHP, downgrading them from "Neutral" to "Undeweight."
While it seems the Australian miners definitely have an upper hand, and half the country surprised the politicians by supporting the miners with the 40 percent super tax.
It wasn't to solely support the mining companies, but the understanding it could devastate their economy and the good jobs the industry provides for them.
As with all governments around the world, Australia needs to realize they need to cut back on their programs and promises, as it's simply not sustainable, as Europe, the United States, and now Australia, are proving.
Showing posts with label Australian Economy. Show all posts
Showing posts with label Australian Economy. Show all posts
Wednesday, June 30, 2010
Monday, May 3, 2010
Australia the Next Housing Bubble?
Australia has been sitting down under on its own seemingly basking in it financial glory, as commodities drove the nation to solid performance while most other countries struggled.
That could soon end as housing prices in Australia grew to their highest levels in at least 7 years for the first three months of the year.
Ben Jarman, an economist at JPMorgan Chase (NYSE:JPM) in Sydney said this, “Today’s result will unnerve Reserve Bank officials, and if nothing else, add to the media fervor suggesting that a bubble is building in the housing market."
Thoughts are that will almost guarantee the central bank will increase interest rates at its meeting tomorrow.
Adding the 4.8 percent increase in house prices in the first quarter to the 5.2 percent increase in the prior quarter point to a very real threat, and now one solely fanned by the media. That gain equals about 20 percent on an annual basis, a cause for genuine concern.
Australia has attempted to successfully slow down the rise in housing prices by increasing interest rates at a steady pace, but that hasn't done the trick, although they hope that will change in the months ahead.
Add to this the increasing mood from China that they may be doing the same thing for the same reasons, which will result in lowering demand for some domestic goods and raw materials, and Australia could quickly go from a strong financial position to a very shaky one quickly.
That could soon end as housing prices in Australia grew to their highest levels in at least 7 years for the first three months of the year.
Ben Jarman, an economist at JPMorgan Chase (NYSE:JPM) in Sydney said this, “Today’s result will unnerve Reserve Bank officials, and if nothing else, add to the media fervor suggesting that a bubble is building in the housing market."
Thoughts are that will almost guarantee the central bank will increase interest rates at its meeting tomorrow.
Adding the 4.8 percent increase in house prices in the first quarter to the 5.2 percent increase in the prior quarter point to a very real threat, and now one solely fanned by the media. That gain equals about 20 percent on an annual basis, a cause for genuine concern.
Australia has attempted to successfully slow down the rise in housing prices by increasing interest rates at a steady pace, but that hasn't done the trick, although they hope that will change in the months ahead.
Add to this the increasing mood from China that they may be doing the same thing for the same reasons, which will result in lowering demand for some domestic goods and raw materials, and Australia could quickly go from a strong financial position to a very shaky one quickly.
Monday, April 26, 2010
Marc Faber: China and Australia
If the insight of Marc Faber is correct concerning China, and he's not the lone person saying this, Australia, and any country strongly relying on Chinese demand for raw materials, or good and services, will find themselves going up and down with the Chinese economy, moving in unison with it.
Of course this is great as long a China continues to grow, but when it stalls, or if there is a bursting of their real estate market, it'll cause enormous repercussions for any business or country overly dependent on the Chinese, which to a large degree Australia is one of the leading ones.
China has largely been the reason Australia didn't suffer as much as other Western countries, as their focus on shoring up their domestic market has resulted in hundreds of billions being used for infrastructure projects, and some others that are dubious at best.
Some people who claim to have seen it say there are huge numbers of empty buildings sitting around which were built to create temporary jobs and nothing else. What happens when they sit around and generate no income? What happens when the bills come due in those cases?
Even if the Chinese government let's it all go, it was real money used to build, and that money was put into the system and has a significant impact on the economy.
China continues to say it's going to take measures to cool down its economy, but so far that has been only words and not actions. One way or the other China will have to cool off, as no country can continue to grow at that rate without severe consequences, especially since there may be many projects which have no use and no way to pay for themselves.
No matter if someone is an investor, a country or a company, the way of China can't continue to be only upward, and when that stops, there's going to be an awfully big headache to deal with, and quite probably a long one.
China should be a part of everyone's portfolio in some way, but those overly invested like Australia, will go as China goes. For now that's working great, what's going to happen when it no longer is?
Australia and others will discover that while they enjoyed a fairly sound economy during the worst of the great recession, they will probably suffer when other countries and economies are stronger, and China finally comes down to earth. The only question is how hard the economic gravity pulls them down, and if they land with a crash or only a thud. At this time it definitely seems a crash landing is what's ahead for Australia; it's not a matter of if, it's only a matter of when, and that may take some years (or not), but it will definitely come.
Of course this is great as long a China continues to grow, but when it stalls, or if there is a bursting of their real estate market, it'll cause enormous repercussions for any business or country overly dependent on the Chinese, which to a large degree Australia is one of the leading ones.
China has largely been the reason Australia didn't suffer as much as other Western countries, as their focus on shoring up their domestic market has resulted in hundreds of billions being used for infrastructure projects, and some others that are dubious at best.
Some people who claim to have seen it say there are huge numbers of empty buildings sitting around which were built to create temporary jobs and nothing else. What happens when they sit around and generate no income? What happens when the bills come due in those cases?
Even if the Chinese government let's it all go, it was real money used to build, and that money was put into the system and has a significant impact on the economy.
China continues to say it's going to take measures to cool down its economy, but so far that has been only words and not actions. One way or the other China will have to cool off, as no country can continue to grow at that rate without severe consequences, especially since there may be many projects which have no use and no way to pay for themselves.
No matter if someone is an investor, a country or a company, the way of China can't continue to be only upward, and when that stops, there's going to be an awfully big headache to deal with, and quite probably a long one.
China should be a part of everyone's portfolio in some way, but those overly invested like Australia, will go as China goes. For now that's working great, what's going to happen when it no longer is?
Australia and others will discover that while they enjoyed a fairly sound economy during the worst of the great recession, they will probably suffer when other countries and economies are stronger, and China finally comes down to earth. The only question is how hard the economic gravity pulls them down, and if they land with a crash or only a thud. At this time it definitely seems a crash landing is what's ahead for Australia; it's not a matter of if, it's only a matter of when, and that may take some years (or not), but it will definitely come.
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