Australia will face recession if the Chinese economy grows by 5% or less, ratings agency Standard and Poor’s warns.
In such a worst case scenario, Australia would suffer a drop in GDP of 1%, unemployment rising to 10%, property prices would plunge by a quarter, and our exchange rate would crash to US65c.
However, the ratings agency believes there is only a 5% probability of this occurring, with a slower easing of growth from 7.8% to 7.3% far more likely.
“We expect China’s urbanisation and industrialisation path has much further to run, and Australia’s enormous resource endowments will likely underpin a sound outlook for its prosperity,” Standard and Poor’s states.
No housing bubble from rate cuts, says Commonwealth Bank
The Commonwealth Bank has moved to calm fears over rate cuts, saying it doesn’t believe lower interest rates will lead to a housing bubble.
“When you’ve got credit growth in the system sitting around the 4.5% level it’s nothing like what you would normally describe as a frothy market with credit growth in the 15-20% range,” the bank’s acting general manager for retail products and customers, Clive van Horen, said.
“Yes, house prices have recovered and they’ve been in positive territory for much of the last year, but in many markets they’re still below their peak pre-GFC. So if your question is, is there a bubble or do we see signs of a frothy market, my answer to that would be no.”
Half of Holden workers oppose survival plan
Australian Manufacturing Workers’ Union state secretary John Camillo has warned that only half of the workers at Holden’s production plant in Elizabeth are willing to vote on reduced pay and conditions.
The reluctance to accept reduced pay and conditions comes despite the auto giant making it clear it will end production in Australia if the conditions aren’t met.
“There’s still a lot of people that don’t understand the variation because it’s legal jargon for them and so that’s why we’ve put a simplified newsletter out, two days ago,” Camillo said.
“They’re reading that so they have a different understanding of what’s happening and we’ll continue walking the shop floor, talking to those people and getting a feel for what the issues are.”
The Dow Jones Industrial Average is up 0.18% to 15498.32. The Aussie dollar is down to US91.04 cents.