NOTED international contrarian Marc Faber has turned his gaze of doom on Australia, warning of tough times ahead for the nation as China slows faster than expected and the domestic "housing bubble" bursts.
In an exclusive interview with The Australian, Dr Faber -- the editor and publisher of the The Gloom, Boom & Doom Report -- warned that a downturn in commodity prices as China slowed would have damaging consequences for the mining industry and economy of Australia.
The proposed mining developments in Australia that were not postponed could struggle to be profitable as metals prices eased, Dr Faber warned.
"The problem with Australia is not only exports to China and the weakening prices for industrial commodities, it is also a lot of household debt and a housing market that is essentially very expensive," Dr Faber said.
Weakness creeping into the resources industry could affect demand for property, deflating real estate prices.
"Frequently a bubble pops without a catalyst, it just pops because the demand weakens, and the demand weakens when assets are overpriced because of affordability reasons," he said. "I think in some regions of Australia there is plenty of supply and diminished demand. I think that this alone will lead to lower (housing) prices."
The resilience shown to date by the economy during the past few years of global economic turmoil also meant Australia was further from the end of the crisis than countries already swept up in the situation. "If you have a global economy that is weakening and you have an island of strength like Australia, I would be very cautious about that island of strength," Dr Faber said.
"The Australians, like the Canadian economy, are doing relatively well but eventually they will also be affected."
He also said Australian stocks were suffering in the eyes of international investors because of the ongoing strength of the Australian dollar, a situation that could raise the "dangerous" temptation to deliberately deflate the currency by printing money.
He also weighed into the debate over the role of China's state-owned companies in acquiring assets in Australia, saying the nationality of the companies owning assets "really doesn't matter".
"Looking at it from an outside point of view, I don't think it matters whether an asset in Australia is owned by a Chinese company or by an American or European company, because these companies still have to operate under Australian laws and Australia is still the sovereign country," he said.
"I am not sure as an economist who is more evil -- large American multinationals or the Chinese state-owned companies.
"That we would have to analyse very carefully, particularly the history of the involvement of some of the multinationals in the politics of developing nations, and in politics in the US with all the lobbyists."
Dr Faber, a Swiss-born investor who currently lives in the northern Thailand city of Chiang Mai, jumped to fame when he advised his clients to exit the stockmarket ahead of the 1987 crash.
In addition to his publishing duties, he serves as a fund manager to private clients and was formerly a director of Ivanhoe Mines, a copper-gold developer in Mongolia.
While China's official growth figures suggest the growth of the country's economy is slowing within a targeted range, Dr Faber said other sets of data suggested China's economy was slowing much more dramatically than the official numbers suggested.
For example, he said, electricity production growth was currently up about 1.2 per cent compared with last year, when it had increased by 13 per cent from 2010.
The Australian
No comments:
Post a Comment