The risks from “El Nino” to the Australian economy and commodity prices

According to the Southern Oscillation Index (SOI) –a key climate indicator– the risks of a strong “El Nino” global weather event are now at their most elevated since 1997-98. While such an event poses downside risks to the Australian economy –at what is now a particularly inopportune time– it also poses upside risk to global oil and agricultural prices. As seen in the chart, the average readings for the SOI in the September quarter was -17.4, which was the most negative quarterly average reading since the -23.7 recorded in the March quarter of 1998. What’s also apparent from the chart is that large negative SOI readings are often –but not always– associated with significant detractions from economic growth by farm gross domestic product (GDP), principally due to poor rains causing a major slump in the wheat harvest. To read more visit: (VIEW LINK)


David Bassanese
Chief Economist
BetaShares

Author, columnist, investment strategist and macro-economist. Previous roles at Federal Treasury, OECD, Macquarie Bank and AFR. I develop economic insights and portfolio construction strategies for BetaShares' retail and adviser clients.

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