S&P has produced scenario analysis on the effect of China's slowdown on Australia's economy, outlining a base case, medium landing and hard landing
S&P has produced scenario analysis on the effect of China's slowdown on Australia's economy, outlining a base case, medium landing and hard landing. Analyst Craig Michaels predicts around a 50% chance that China will achieve the base case soft landing of GDP growth at around 7.3%. He puts the probability of a medium landing of growth at 6.8% at 20-25% and a hard landing with growth tumbling to 5% at 5%. In these scenarios, Australia would still maintain positive growth other than in the hard landing scenario where GDP would fall by 1%. Unemployment is also expected to rise to at least 6% in all scenarios, but up to 10% if China suffers a hard landing. Although most of the figures appear reasonable, the author notes that the terms of trade decline for all scenarios appears too mild given Australia's current positioning. (VIEW LINK)
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