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Australia’s trade deficit widens, hyperinflation on the way?

Posted by Adrian on December 3, 2007

With figures indicating a $2.98 billion AUD (October 2007) increase from a deficit of $1.92 billion AUD in September 2007, meaning imports out weighed exports. A prolonged drought and apparent infrastructure constraints on main export industries such as mining. The inflated AUD, primarily from investor speculation, has added to the import boom; thus creating a larger than expected trade deficit. Australia still has over inflated and bubble oriented markets such as housing. The credit market problems worldwide will also effect consumers in Australia, pushing up interest rates on loan and general bank charges. Oil and food will also contribute too inflationary pressures. So, with disproportional markets occurring within the Australia economy, with a hope that exports will pick up and the trade deficit can shrink somewhat, it still appears that Australia is running hot. With little net income coming into the country (trade surplus) It would all indicate to a heavily leveraged local economy, with consumer and businesses alike deeply indebted, with local consumer demand not slowing; which I believe is leading to hyperinflation.

Suffice to say the Australia economy could be heading for a sharp downturn, with or without problems occurring in America. Although a global credit and liquidity squeeze will effect all world markets detrimentally. Some more so than others, especially markets that are running hot with inflationary pressures, such as Australia.

It would be false dichotomy to assume that a trade deficit and a booming increase in imports may offer cheaper goods to the consumer. With global imbalances and global inflation, prices are rising not falling. All at the detriment of falling currencies, namely the US dollar.

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One Response to “Australia’s trade deficit widens, hyperinflation on the way?”

  1. […] Australia’s trade deficit widens, hyperinflation on the way? […]

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