A Bad Week for the Australian Economy

One of the first things one notices about Australia after having been away for any length of time is the arresting color scheme. We rode the train from Brisbane Airport down to our family’s house here on The Gold Coast this morning. The track weaves through a rich tapestry of yellows and oranges.

Almost everything is some shade of a rusted auburn…from the corrugated iron roofs of the old Queenslander homes to the railroad spikes to the doors on the old Holden automobiles and, of course, the shoulders of the outdoor, sports-loving people. The “Sunburned Country,” they call it.

Your editor arrived on Friday, a day after the Aussie stock market shed $30 billion dollars, or about 2.7%. It was the forth consecutive day the index ended in the red. The Aussie dollar, after having outpaced gold’s meteoric rise over the past few months, also fell against the greenback. We hadn’t seen Friday’s numbers when we jotted these few notes on the train but, all in all, it wasn’t a great week for the Aussie markets.

Nevertheless, most businesses here are of the mind that the worst of the economic crisis is long gone. Eighty-five percent of businesses said as much, according to the Veda Advantage Business Sentiment survey, released to The Australian this week. Moreover, over half of respondents said Prime Minister Kevin Rudd’s record-breaking $42 billion stimulus did not improve business prospects in any meaningful way. We’ll see how they do when the taps run dry, as they soon will.

Appetite for risk, you see, is eroding. Investors around the globe are beginning to ask themselves exactly what this “recovery” is founded on and whether it can last. The IMF warns that growth in the Asian region is set to fall again. They caution that poor economic data from the US will continue to dampen export-reliant Asian economies…especially once government gifts and stopgaps expire.

We’ll “see how she goes,” as they say, during the week and, between barbeques and beers with friends, we’ll bring you a few notes from our temporary post.

The Daily Reckoning