Economic events over the last couple of days have provided some compelling evidence of the widening divergence in conditions between the US and Australian economies.
Earlier this week Rio Tinto revealed that Chinese steel giant Baosteel has agreed to a price rise of 96.5% for its iron ore, while there are reports today that Japanese steel mills have agreed to an even bigger price.
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While the result isn’t all good news – it will add yet more fuel to Australia’s overheating economy – it highlights just what a huge role the resources boom is likely to play in maintaining national prosperity in the years ahead.
The contrast with the US economy couldn’t be more stark. The June edition of the Conference Board confidence index released overnight revealed consumer confidence there has slumped to a 16 year low, with concerns over job security a key factor in the slump.
And perhaps even more disturbingly, house prices across the US are continuing to fall. According to the S&P/Case-Shiller index, average house prices across 20 US cities dropped again in April to a level 15.3% lower than the same month in 2007.
The notion that the Australian economy has decoupled from the US may just be a theory, but the evidence to support it is growing more and more persuasive by the day.
Pointing the other way, of course, is the Australian sharemarket, which continues to take much of its lead from events in the US. Today the grim US outlook has helped push the S&P/ASX200 down 0.3% on yesterday’s close to 5275.7 at 11.15am.
That same US weakness has sent the Australian dollar in the other direction – at 11.15pm it is trading at US95.68c, up 0.12% today.