Lucky, Lucky, Lucky revisited?

Bondi was in full bloom over the weekend, packed with sun-seekers and chirpy little Nippers, wide-eyed trainee surf life-savers learning about the perils of the ocean.

ABC Radio crackled to the reassuring sound of commentators Jim Maxwell and Glenn Mitchell, reporting on Australian cricketing success in Bangalore.

Both marvelled at a century from Mike Hussey, the most reliable of men in these most unreliable of times.

Bathurst meanwhile basked in the full-throttled roar of V8 Supercars, another familiar sound of the early southern summer.

For all the signs of summer as usual, Kevin Rudd was hunkered down with his top economic advisers in Canberra coming up with his response to the financial crisis.

The headline is that the government will guarantee all deposits, however large, in Australian banks, building societies and credit unions for the next three years.

"The global crisis has entered a new and dangerous phase," said Mr Rudd, "with real consequences for growth, for jobs and therefore for the future."

The sunniest of Sundays followed the blackest of Fridays, a day when the Australian Stock Exchange lost over eight per cent of its value and saw its biggest single day slump in 21 years.

The Australian dollar has also tanked. A few weeks ago there was talk of parity with the the US dollar.

Last week it crashed to sixty-three cents, as it was targeted by short-traders who have started to prey on currencies because they are banned from targeting companies.

So, is it time to reassess that hope-filled blog from less than a fortnight ago, Lucky, Lucky, Lucky?, which suggested that Australia was better placed than most to weather the global economic storm?

Surely the slump in shares on the stock-market alone, which has now lost 42% of its value since this time last year, demands a reappraisal.

For all that, the basic thrust of the blog still holds true: that Australia is in better shape than most countries to weather the storm, but that while its insulated from the likely global downturn it is by no means immune.

Recent sharp falls in global commodity prices, combined with concerns that Chinese growth is slowing down, meant that shares in the mining giants, BHP Billiton and Rio Tinto, were badly hit on Friday.

And that is a big concern for the Australian economy as a whole, because its 17-year period of uninterrupted growth has been built on the mining sector.

As The Australian reports, Mt Gibson, the iron ore producer, has revealed that almost three-quarters of its Chinese customers have asked for a delay in delivering their goods, which indicates a slow-down.

Still, even though China might not enjoy growth rates of 12% each year, it is still on the rise, and the Australian minerals sector will remain one of its main beneficiaries.

Important in the armoury of 'fortress Australia' is its banking system, which is strictly-regulated and well-capitalised.

Its comparative strength was indicated last week, when the Commonwealth Bank snapped up Bank-West, part of the troubled HBOS group.

Mr Rudd has announced guarantees to deposits not because he thinks the banks will fail but because he wants to protect them from foreign competition.

With other governments offering guarantees, Australian institutions would have been placed at a competitive disadvantage.

Given its huge budget surplus of over $A20 billion, the Australian government is well positioned to 'prime the pump,' the spending strategy deployed by Franklin Delano Roosevelt to get America out of the Great Depression.

Sure enough, the Rudd government has brought forward an announcement on its major infrastructure projects, that great mainstay of FDR's New Deal, which will pile billions of job-creating dollars into the economy.

The banks are still predicting growth. NAB reckons the economy will grow by 1.25% to 1.5% for 2009, while the IMF predicts 2.25 growth. Still, most commentators expect unemployment to rise - possibly to 5.5%, which would mean the loss of 300,000 jobs.

On the housing front, Australia does not have much of a sub-prime sector to worry about (about one per cent is the estimate of Shelter NSW), but there is a problem of indebtness in the suburbs, from people who borrowed against the inflated value of their homes.

I was in the Western Suburbs of Sydney last week, which have the highest repossession rates in the country. There, property values have fallen by 30%. Last week, the IMF identified Australia as one of the countries which might see its property bubble burst.

Caravan parks are doing a roaring trade, as people are forced to consider what are called 'last resort housing options,' a new euphemism in the housing market.

I visited one last week, which is already full and reckons it could double its occupancy overnight if it had room to expand.

These past few weeks have seen lots of credit crunch-related stories.

From bordellos reporting a down-swing in business to corporate entertainers at the Melbourne Cup bracing themselves for hospitality tents littered with tumbleweed.

But the saddest I have heard so far came from a woman who markets apartments for retirees. Couples on the verge of retirement who had paid their deposits were ringing her all last week saying they could no longer afford to buy.

This past month has reminded me of my student days in 1989, when history professors and political scientists would theatrically rip up their pre-prepared lectures because communism was collapsing in Eastern Europe at such a hurtling pace, and their long-held theories about the Cold War were fast becoming obsolete.

Now, as capitalism comes in for a hammering, the tumble of events is equally disorientating..

• Bookmark with:
• del.icio.us |
• Digg |
• Newsvine |
• NowPublic |
• Reddit
• - What's this?