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Australian exporters hurting in current econo -

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Australian exporters hurting in current economic climate

AM - Tuesday, 30 November , 2004 08:28:00

Reporter: Karen Percy

TONY EASTLEY: Australia's financial sector is having a record time of it. The local stock market is
in new territory - up 20 per cent over the past year - and some of Australia's leading companies
are reporting record profits.

But the Australian dollar is pushing 80 US cents, and that's making exporters very unhappy, and
yesterday's trade figures reveal a trade deficit at a record $13.7 billion for the third quarter.

Here's Karen Percy on the contradictions in the Australian economy.

KAREN PERCY: There's a major gap these days between what's going on domestically in Australia's
economy and what's going on globally.

While consumers are continuing to spend up a storm on imported goods made cheaper by the strong
Australian dollar, it's a different story for Australian exporters.

Yesterday's third quarter current account figures - a record $13.7 billion gap between imports and
exports - shows just how much they're hurting.

HSBC Chief Economist, John Edwards.

JOHN EDWARDS: Well it's certainly bigger than we expected, and not only that, it's difficult to see
that it will be very much reduced over the coming year. We expect it to decline only very slowly.

KAREN PERCY: At 6.1 one per cent of our gross domestic product, the deficit hasn't been this bad
since 1990, says Bill Evans from Westpac.

BILL EVANS: What's really concerning us is that we're just not getting that recovery in resource
exports. A lot of that is to do with supply - the demand is undoubtedly there, but the miners just
don't seem to be able to get the supply going, and that's made it very very difficult for our ... for
us to run a proper current account position.

KAREN PERCY: At the same time, Australia's share market has never been so strong.

The ASX 200 list of stocks hit yet another all time high yesterday, closing at 3,929 points.

Bill Evans says it won't be too long before the ASX 200 hits 4000 points.

BILL EVANS: Oh look we think it'll probably happen this year with the momentum that we have at the
moment, we saw good profit numbers yesterday. The markets are surprisingly now pricing in about a
30 per cent probability that the Reserve Bank will be cutting interest rates early next year. I
don't think that's going to happen, but market momentum at the moment is sort of indicating that
any fears of rising interest rates are out the door.

KAREN PERCY: John Edwards from HSBC says Australians have a number of good reasons to be investing
right now.

JOHN EDWARDS: Very strong profit performance by Australian companies. Secondly, relatively low
interest rates, and very little expectation that they're going to be very much higher, and thirdly
the want of alternative asset classes for Australians. They've lost interest in residential
property, and rightly. Bonds don't look to be a very good buy at current levels, and so equities
are the really big class of financial assets that are left for people to buy, and that's why
they're buying them.

KAREN PERCY: How high might the ASX-200 go then, do you think?

JOHN EDWARDS: Well I'd be reluctant to put a number on it, but I think it can go higher than it is

TONY EASTELY: HSBC Chief Economist, John Edwards, ending Karen Percy's report.