Impending Economic Crisis?

It goes without saying that the impending economic doom has been talked about by experts and citizens alike over and over all over the world. But why exactly are they making these predictions?  Although Australia’s economy has steadily grown for 25 years in unprecedented ways, there are now two vastly different interpretations of Australia’s success.

The Australian model is that which consider’s Australia an example to other struggling countries. Having the ability to survive a turbulent global economy and deflect challenges. However, the opposing model argues that Australia has simply done nothing but ride its luck from the boom of global commodity markets. It is called the Australian bubble and argues that when the resource cycle changes, so will Australia.

A significant amount of Australia’s success has indeed been traced to this global boom. The fact that Asia is its biggest trading factor coupled with its high price exports versus low price imports has benefitted Australia. But slower growth in China means that resources and cheap imports for Australia is no longer something to rely on. Moreover, they are experiencing a financial crisis as well, similar to the United States. While house prices still remain high, the Australian dollar is also very high compared the the US dollar.

These factors and more have the more pessimist experts predicting an impending crash. As Mark Thirlwell of the Pacific Standard puts so eloquently, “an economic crash in China would send global commodity prices plunging, crash Australia’s terms of trade, hammer Australian incomes, drive up unemployment, and send house prices into a downward spiral—Australia’s own mini-financial meltdown, payback for all those comfortable boom years.”

Only time will tell how Australia fares and if it will once again survive or the bubble will burst.

 

-Jenny Zhuo

Sources: http://www.psmag.com/magazines/march-april-2013/australia-economy-recession-53744/

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