“Australia is a leveraged time bomb waiting to blow,” Albert Edwards, Société Générale’s London-based global strategist, said. “It is not just a CDO, but a CDO squared. All we have in Australia is, at its simplest, a credit bubble built upon a commodity boom dependent for its sustenance on an even greater credit bubble in China.”
From William Pesek at Rudd? Gillard? Australians have bigger problems – Columnists | IOL Business | IOL.co.za.
What rubbish. We listen regularly to IMF and other ‘learned’ bodies handing out advice to us. The old saying of ‘Physician heal thyself’ would seem more apt. China may have slowed but the party cannot let the economy fail or social unrest there would make the Arab Spring look like a garden party. Asia will continue to grow economically and the future for Australia lies in becoming the food bowl of Asia. Why else are the Chinese buying into Australian agriculture?
Australia is somewhat reliant on Chinese demand for our minerals, but our economy is fairly broad based,with services being an increasingly important export, as well as our meat and other foodstuffs.
The proposition that Australia is a bubble supported by the “Chinese bubble” contains within it several false propositions. First, it is quite absurd to be describing Australia’s economy as overly in debt (“a leveraged time bomb”). We have one of the lowest debt levels of any country, and a AAA credit rating..Second, the household debt is by international standards not excessive. Third, the business confidence levels (being quite low) do not support conclusion that there is in any way an “over-exuberance” that would generate a bubble.