Australia’s apparent economic strength, while pleasing, is shadowed by the faster-than-expected slowdown in China and raising interest rates in the US – very real concerns given how dependent we are on the US and Sino economies.
Add the risk of a trade war and the outlook is much more challenging.
As China’s growth starts to ebb, that could easily spill to other regions, such as ours. It is a factor now returning as one of the key risks to world economic growth.
It also highlights a clear, emerging trend: major economies such as China, Japan and Europe are softening, as the United States’ grows in strength. This divergence in growth is a new trend (as last year major economies tended to grow in sync) and creates more room for upset particularly as the US raises rates and threatens a trade war.
Emerging markets are already responding badly. As the US, with strong earnings, more confidence and a rising dollar, is managing its economy by increasing interest rates, which has led to tightened financial conditions and resulted in a sharp correction across most emerging markets.