Feb 10, 2012

Australia's Two Speed Economy

The Reserve Bank of Australia has released its quarterly statement on monetary policy and economic conditions. In it they note that the resource sector is indeed booming, as
it is likely that over the next year the level of business investment in the economy
will reach its highest level, relative to GDP, in at least half a century.
The report also goes on to say about the rest of the economy:

In contrast, conditions in a number of other sectors remain subdued, with the high exchange rate, soft consumer demand for goods, the scaling back of public investment and weak building construction all weighing on activity.
This should be no surprise as the Australian economy is currently extremely dependent on exports of raw materials to one customer - China. As we have mentioned before the situation is potentially quite dangerous and the central bank and the government should be constantly on the lookout for ways to reallocate capital from the resource extraction to other sectors of the economy.

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