What European troubles mean to Australia?
Despite the geographical distance we should expect the European crisis to have a fair impact here in Australia. As is always the case with all global turmoils, the effects can be two fold: negative and positive. The saying goes: “If you want to find a big opportunity, look for a big problem.”
The world has been going through tumultuous changes for the past two, if not three, decades. The end of communism, the opening of China, rapid technological progress and integration of global commerce as well as the shocks of terrorism, wars in Iraq, Afganistan, the Arab Spring (or as some call it Islamist winter).
Australia’s business focus has shifted to Asia. Australian Trade Commission closed or seriously downsized commercial offices in Europe and America.
But can we ignore Europe. Or should we learn from its problems arising from funding welfare states and the aging of societies accustomed to generous working condition, health, social benefits and pensions?
The European tremors are already shaking up Australian banking and stock markets. Even though Australian government has never been greatly involved in lending to European governments, European banks and investors have been the major sources of capital inAustralia. Now, they will be pooling their resources domestically and we are already seeing liquidation of their overseas, including Australian assets. So, less and less European capital will be available to Australian financial institutions.
The upside is that astute investors inAustraliamight be able to snap up some good quality assets in fire sales by the Europeans.
The global interconnectedness extends, of course, to China, Since 2010 China has become world’s largest exporter overtaking Germany. As Europe slows down, the Europeans are cutting back their Chinese imports, some countries by more than 20%. This means reduced production in China and slowing of the demand for Australian commodities.
Migration toAustralia is again looking like an appealing proposition to many young, well educated Europeans. In 2011 visa’s to Irish people increased by 50% and Greeks are leaving their country in droves.
If we want to learn from Europe’s mistakes we should be wary of the Gillard’s government spending binge, and all the feel good “family” programs. Government spending should not be faster than the revenue. And our borders should be wide open to qualified migrants from Europe to fire up our innovative, high value, advanced technology, manufacturing, knowledge based services and education sectors in particular.
Acknowledgement: Oliver Marc Hartwich: Faraway, so Close: How the Euro Crisis Affects Australia. The Centre for Independent Studies.