On the Blogs: The Economy of the ‘Lucky Country’ Is at Risk From Its Lack of Diversification

first_imgOn the Blogs: The Economy of the ‘Lucky Country’ Is at Risk From Its Lack of Diversification FacebookTwitterLinkedInEmailPrint分享Satyajit Das for Bloomberg View:If Australia is an economic miracle—the so-called Lucky Country, beneficiary of more than a quarter century of uninterrupted growth—then its banks are its most visible sign of strength. In fact, though, this ruddy good health masks some deeply worrying trends. The balance sheets of Australia’s biggest banks are far more vulnerable than they may seem on the surface—and that means Australia is, too.Australian financial institutions have made the same fundamental mistake the rest of the country has, assuming that growth based on “houses and holes”—rising property prices and resources buried underground—can continue indefinitely. In fact, despite a recent rebound in Chinese demand, commodities prices look set to remain weak for the foreseeable future. Banks’ exposure to the slowing natural resources sector has reached nearly $50 billion in loans outstanding—worryingly large relative to their capital resources.Pundits have been saying for years that Australia needs to diversify its economy, boosting services exports—primarily tourism, education and health—rather than continuing to depend on resources and debt-fueled property growth. Banks need to do the same, reducing their exposure to the housing market and the mining industry. At the same time, they should move swiftly to shore up their balance sheets, aggressively increasing bad-debt reserves, raising capital and gradually trimming dividends. Even their otherwise enviable luck can’t last forever.In Australia, All That Glitters Isn’t Goldlast_img read more

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