Trade tipped to take hit
JAPAN’S deadly earthquake and tsunami will cast a further pall over Australia’s economy as the Gillard Government prepares its crucial May budget.
The latest natural disaster to hit the Asia-Pacific is likely to cause further harm to the Australian economy, already under pressure following the devastating Queensland floods.
And the resources sector, which has been a stand-out in Australia’s recent econ- omic surge, is likely to particularly feel the blowback as Japan’s industrial capacity takes a hit.
Australia’s stellar econo m i c g r o w t h h a s b e e n underpinned by a surge in commodity exports to Asian giants including Japan and China.
Economists last night predicted the 8.4 magnitude earthquake will have flow-on effects for the economy.
‘‘ Obviously to the extent that it will knock off industrial capacity ( in Japan), then that hurts us,’’ said Chris Richardson, partner w i t h C a n b e r r a - b a s e d Deloitte Access Economics.
‘‘ Yet again, a natural disaster is a problem for Australia.’’
Asi a n markets r e a c t e d s w i f t l y t o t h e m a s s i v e tremor. Japan’s sharemarket closed some 1.7 per cent lower and Nikkei futures fell 3 per cent in after-hours trading in Singapore as the scale of damage became apparent.
T h e J a p a n e s e d i s a s t e r c o m e s a w e e k a f t e r Treasurer Wayne Swan conceded the recent spate of natural disasters in Australia would see economic growth slow in the March quarter.
‘‘ They will take a heavy toll on output and will take a heavy toll on our budget,’’ Mr Swan said, of the floods in south-east Queensland and Cyclone Yasi.
For the past 50 years, Japan has been Australia’s best international customer with two-way trade of just under $ 60 billion.
Exports, particularly of coal and iron ore, have been a stand-out in our terms of trade with the Asian giant, soaring to around $ 40 billion a year.
Coal exports alone were worth around $ 13 billion a year while iron ore contributes $ 6 billion in annual revenues.
This has helped to underpin Australia’s economic resilience and buffer the economy from the worst effects of t h e g l o b a l f i n a n c i a l meltdown.
While the Japanese earthquake is expected to see a further short-term hit to A u s t r a l i a ’ s e c o n o m i c growth, economists were loathe to predict the impact last night.
And some economists say while the Australian economy will suffer a short-term hit, the ‘‘ rebuilding’’ phase will actually benefit our companies, particularly in the resources sector.
Minerals industry figures last night were also uncertain about the impact on Australia’s resources sector. Japan’s energy sector, which relies partly on Australian coal, could face some disruptions.