Dutch disease coming to Australia?
The IMF Regional Economic Outlook (Asia and Pacific) published in April basically suggests that the recovery in Asia is on a decent track with regional and domestic demand playing an important role in the recovery. Chinese and Indian economies “are presumed to expand by 9.5% and 8% respectively … with important spillovers for other countries… , particularly through demand for commodities.”
Indian business houses are already going for Australian mining assets with considerable aggressiveness, building railway lines from the mining hinterlands to ports which are also in some cases being developed by Indian companies (Adani group comes to mind). Does this mean that we can expect a sustained improvement in the Australian and Canadian dollars.. basically commodity currencies? And what does this mean for the competitiveness of other Australian exports? The strengthening currency should also lead to greater import demand further hurting domestic manufacturers. Can Australia slip under the standard curse of mineral resource rich countries?