Tuesday, March 03, 2009

Australia's fascinating economy

What a fascinating beast this Australian economy is just at present. It has also been fun watching commentators twist themselves in all directions as they try to adjust their forecasts to apparently diverging statistics.

Economic data released yesterday (Monday 2 March) led to gloom and doom, with Australian Treasurer Wayne Swan suggesting that last night that the global slowdown would have a “dramatic impact” on the local economy, with commentators downgrading their forecasts. Then today with good data, many commentators hastily revised their forecasts again.

Today also the Australian Reserve Bank decided not to reduce interest rates, suggesting that further monetary stimulus was not necessary. Yet the Government is still talking gloom. As I write, Mr Rudd is revealing his seven principles for fixing the global economy – I lost count around eight at the use of the words “toxic assets”. We appear to have moved from war to medical analogies; the virus of toxic assets must be fixed.

I know that I should not be enjoying this so much, but I cannot help myself. I make no pretence of understanding short term movements. What I have tried to do is to establish a longer term position against which I can test immediate movements.

I do not have time today to look properly at the numbers. However, nothing that I have seen causes me in any way to switch my previous position. To my mind, the real crunch point is still some months away.

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