In the last week there has been a raft of news confirming our views of the last year that Australia will weather the current global economic storm very well. In fact it always does. Any collapse in commodity prices is accompanied by a collapse in the $A. The current scenario is even better. We can see from several announcements that Australia's trade surplus is not just good, but excellent. Its at record levels - see article 1 and article 2 to that effect.
Australia is benefiting from a combination of factors:
1. Higher export volumes of minerals - particularly gold, iron ore and coal I suspect, maybe alumina.
2. Higher export prices - for this year anyway - so expect trade surpluses of another $3bil per month, rising to $3.8bil in 9 months, before they fall back to $3billion.
3. Strong population growth. Did you know immigration numbers have doubled from 140,000 to 300,000 between 2007 and 2010. Its part of the stimulus.
4. Business investment in mining and energy is strong - despite the tax applied by Gillard - which destroyed our credibility. There is already a lot of work in progress, so it will take a few years for our loss of credibility to show up in stats. In the meantime, the govt will need to beg for the forgiveness of foreign investors.
5. Chinese stimulus in the wake of the 2008 Sichuan earthquake and more recent Chinese government stimulus of RMR 4 trillion is going to benefit Australia. You can almost expect $500 billion of that money to make its way to Australia in terms of mineral purchases and mine investments. In reality, it might come from a different pot, but its all good. Except for Labor. They go to purgatory.
If you want to profit from mining buy a mining stock - don't encourage government parasitism.
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Andrew Sheldon www.sheldonthinks.com
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