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Is Australia's economy in line to match Canada's?

Cutter Slagle
|Jul 27|magazine11 min read

Originally reported by our sister brand Business Review Canada, with help from the Sydney Morning Herald, Australia’s economy doesn’t seem to be doing too well. More so, the country is on course to match Canada’s failing economy, in which plunging dollars, declining oil prices and transitions into non-energy-led growths are just the beginning.

And the question on everyone’s mind is quite obvious: Can Australia bounce back, perhaps even dodge further situations? Or is the economic damage already done?

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It most likely comes as no great surprise, unfortunately, that Canada isn’t doing well. Just last week, the Bank of Canada cut interest rates to 0.5 per cent, which happened to be the second cut in 2015. As mentioned above, this cut can be contributed to new declines in oil prices and a hard transition to non-energy-led growth. And while the bank denied that the country is in a recession, something is definitely going on—in Australia, too.

Commenting on the matter, Mr. Lele, an Australian based in the Bahamas, said this: “Canada is a fantastic six-month preview of what’s going to happen to Australia. The Australian dollar, it’s going below US70₵ in the next six months quite easily. More importantly, it’s not bouncing back any time soon. I can easily see a scenario where it goes into the US50s.”

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Furthermore, it’s believed that Australia resembles an emerging market, and therefore is exposed to some of the same dynamics of commodities and fiscal policymakers that don’t have enough structural form. It can be argued that Australia is actually facing some of the exact same issues that new, emerging markets are facing.

Lele continued his theory by saying, “It’s inevitable—the Australian economy is going to have to go into recession.”

And due to third-quarter struggles, the outlook for the economy doesn’t look good, except for the agriculture industry.

However, United States-led growth may offer opportunities in foreign exchange markets. Particular areas that could prove to be profitable include home builders, consumer discretionary stocks, industrials, capital markets and technology plays.

What are your thoughts on the matter? As an Australian citizen, are you worried that darkness is coming? Or are you hopeful for brighter days?

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[SOURCE: Sydney Morning Herald]

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