Our asset markets and the Australian dollar continue to be buoyed by excessive international liquidity

Our asset markets and the Australian dollar continue to be buoyed by excessive international liquidity. This liquidity aided Australia in dealing with the aftershocks of the GFC. The massive increase in our commodity trade with the rapidly growing Chinese economy occurred in the same period as central banks flooded international markets. This has meant that Australia avoided recession or any significant economic contraction. The last 23 years of continuous growth, recently accelerated by Chinese trade, makes Australia particularly vulnerable to the normalisation of interest rates, weakening commodity prices and relative currency strength. The BIS report highlights these risks. Without strong political and effective economic management, the risks in navigating our way through a volatile and uncertain future are starting to rise. (VIEW LINK)