Australia’s economy can “ride out” the turbulence in global markets because of its strong outlook and the continued growth of China, its biggest trading partner, Australian Treasurer Wayne Swan said.
“Australia has very low public debt, low unemployment, a massive pipeline of investment and we expect to bring the budget back to surplus next financial year,” Swan said in an e-mailed statement yesterday.
While Australia isn’t immune to what happens in the rest of the world, “the prospects for our region remain much stronger” than for Europe and the US.
The global economic outlook will remain uncertain for some time as the US and Europe seek to reduce debt and make their fiscal budgets more sustainable, Swan said.
There’s good reason to be “optimistic” about continued expansion in China as incomes improve, he said.
About US$6.8 trillion was wiped off the value of global equity markets from July 26 through Aug. 11 as Europe’s debt crisis deepened and investors speculated the US economy, the world’s biggest, may contract.
US stocks fell for a third straight week, including the biggest one-day drop since 2008, after Standard & Poor’s reduced the nation’s credit rating to “AA+” from “AAA” on Aug 7.
The Australian dollar dropped 0.8 percent to US$1.0355 in the five days to Aug. 12, after reaching a record US$1.1081 on July 27. The Australian 10-year bond yield fell to 4.43 percent, the lowest level since April 2009, sliding four basis points since Aug. 5 in a third week of declines.
The turmoil will make it more difficult for the government to achieve its target of returning its budget to surplus in the 2012-2013 financial year, Swan said.
The nation will benefit as expansion in Asian economies spurs demand for commodities as well as tourism, education and luxury goods, he said.
“The tyranny of distance is really a thing of the past for Australia,” Swan said.
“With the shift in global economic weight from West to East, we’re finally located in the right part of the world at the right time,” he said.
Europe and the US are both facing a “sustained period of sluggish growth,” he said.
China’s GDP will increase 9.3 percent next year, according to the median forecast of 10 economists surveyed recently by Bloomberg.
That compares to predictions of 1.8 percent growth in the US and 2 percent in Europe.