Australia sheltered from global economic woes

No disasters for local investment market

By Karin Derkley
Thu 18 Sep 2008

Australia will remain relatively unaffected by the offshore economic downturn.

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Despite global panic about an impending world recession, Australia would be spared from the economic crisis, a chief economist has said.

"While the world is collapsing around us, I don't see disaster here in Australia," BIS Shrapnel chief economist Frank Gelber said, at the economic forecasters conference.

"In fact Australia is in the middle of a 'God-Almighty' investment boom that has only just begun, and has a lot longer to run."

It was important to separate the superimposed global financial crisis from the real economy, Gelber said.

"There is nothing fundamental that will affect the Australian economy. Here it is business as usual."

Australia is sheltered from the forces afflicting the rest of the Western world, given connections to Asia - which is also largely insulated from the US led crisis.

Asia, including China, India and Japan, now make up 65 per cent of our export markets, while the US is just 7 per cent.

"China's growth will slow, but it will not collapse, and it will continue to place demand on our commodities." Gelber said.

Meanwhile, after years of underinvestment by business and government during the 1990s, both sectors are channelling expenditure into infrastructure, machinery and equipment to deal with capacity constraints.

Agriculture is back on track, exports are improving with the falling dollar, and housing construction is waiting in the wings as the next source of investment spending as the housing shortage reaches crisis level, Gelber said.

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