I don't do hysterical
Without a mining boom Australia is in deep trouble. We don't produce much of anything else, some cows and wool, the rest of the economy is based on people spending money which they have been, until recently, at an unsustainable rate.
The whole world is linked inextricably these days. With the US and EU/UK in trouble that is China and Japans biggest export markets teetering. That puts Australia in a VERY precarious situation. Everywhere else in the western world is madly trying to save banks from collapsing left and right and seeing house prices drop dramatically and foreclosures climbing.
Dropping interest rates and flooding the market with liquidity has never worked for very long before why will it work this time?
In 1929 the stock market fell about 35% in a very short period and for all the same reasons as now and the US govt did all the things they, and our, govt are doing now. There followed a 50+% rally and then in 1930 the markets dropped by over 80%...and pretty much stayed there until WW2.
The Australian stock market has dropped by 35% odd in the last 10 mths or so. The US/EU/UK markets fell more. The Australian Govt is dropping interest rates and flooding the market with cheap money. The US/EU/UK govts more so.
The housing market is drying up. Car manufacturers are laying off 1000s of staff and may very well cease to exist in Australia...the parent companies in the states are in HUGE trouble and in no position, or mood, to help. Toyota is about the only car company having a good year, so far at least.
My Brother in Law is in marine electronics - the arse has dropped out of that in the last months...ditto boat sales. I have no doubt the same applies across the board with white goods, TVs etc, most purchased on zero down and zero interest for two years - then about 25% interest.
Oil is down over 50% (did you know Australia is an oil exporter? - we export our very high quality oil and import !!!! oil to refine) and, as Ozbusdriver pointed out above, steel is down around 60% in the last few months. With demand for steel dropping the demand for coking coal will also be down because that is used to make steel. Coal is our biggest export. Hopefully the Chinese will keep buying it for their power stations but they do have plenty of their own.
With the world reeling under the worst financial crisis in 70 years what do you think will happen in due course with inbound international tourism? If Australians aren't buying cars, houses, boats, depth sounders, GPSs and TVs and are worried about the future are they still going on holidays domestically let alone internationally?
4% unemployment?
That would be the doctored figure that doesn't show people in part time employment whether they like it or not. It can hit 10% in the blink of an eye and that figure will STILL be a politically doctored figure. Much like the CPI is doctored by close to 50% by stripping out food, transport and housing but includes flat screen TVs that have actually been getting cheaper
About the only really good thing happening is the currency is tanking...really bad for importers but great for exporters..and expats
Rudd has just blown 1/2 the budget surplus trying to get people to go into more debt.
Even the 30% of people who own their houses outright will be significantly effected because they are, for the most part, older Boomers relying on the increased equity in their homes to fund their retirement. Don't believe the BS about boomers all being wealthy. Those that retired a decade ago have pretty good defined benefit super schemes but for those retiring now, and in the next decade its mostly wrapped up in their homes and therefore illusory wealth.
Can you really not join the dots?
Take a look at those graphs at the bottom of page two again and tell me how this ends in gradual deflation...I am a glass half full kinda guy and I cant see it.