WARNING: Will Tony Abbott (and You) Survive This?

WARNING: Will Tony Abbott (and You) Survive This?

In the media last week, we emphasized the prospects for a hard landing in Australia. Being tied, by commodities, to the slowing growth of China puts Australia in the path of a serious economy malaise. Since 2010 we have been warning investors about the declining iron ore prices, Australian dollar and employment prospects. Back then China’s growth was being advertised at 12 per cent – fuelled in no small part by the property glut that was under construction.

That Chinese property boom is over, as is the resources boom, but investors and economists may be underestimating the magnitude of both China’s slowdown and the impact of that on Australia.

We have more recently been reporting that there is simply no way China’s economic growth is the 7 percent that is being reported. And it’s heading to what we believe will be 3 or 4 per cent.

That does not bode well for Australia, for you, or for Mr Abbott and his colleagues.

According to Reuters today; “China’s trade performance slumped in January, with exports falling 3.3 per cent from year-ago levels while imports tumbled 19.9 per cent, far worse than analysts had expected and highlighting deepening weakness in the Chinese economy.”

“The data – in particular the import data – is worrisome even after accounting for cyclical factors; last year the new year holiday idled factories and financial markets for a week in January, but this year the holiday comes in late February and January was a full month of business as usual.”

Most importantly for investors chasing yields (be very, very careful), “Imports from Australia…[a] major fuel and commodity supplier, slid by 35.3 per cent.”

This result will feed through Australia’s quarterly accounts and when it is printed, you will need to be very nimble on rates, bonds, equities and the currency.

Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery, find out more.

MORE BY RogerINVEST WITH MONTGOMERY

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.