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)
Livewire News brings you a wide range of financial insights with a focus on Global Macro, Fixed Income, Currencies and Commodities.
No areas of expertise