THE STATES NOT CHINA FOR RECOVERY
Written on the 17 February 2010
THE recovery of the Australian economy will have nothing to do with China, according to economist and CEO of Queensland Investment Corporation (QIC) Doug McTaggart (pictured).
McTaggart has let fly at regulators for the calamity in the US, but indicated positive growth ahead banked on the return of the consumer from the world’s economic hub.
“Who will lead us out of the morass? People talk about China, but it’s utter rubbish,” McTaggart told a capacity room attending a UDIA luncheon on the Gold Coast.
“If we want the world to grow, we want America to start spending again and they will take the rest of the world with them. Will China try to save the world? No, so let’s move on.”
China, says McTaggart, has gone from the largest importer of steel in the world to its largest exporter as it continues to stockpile iron ore. He says if it were to ‘export inflation’ to the US, America could absorb it.
The US economy is growing at 5.7 per cent. While the US housing market is rebounding, it has along way to bounce. During the economic crisis, the construction market contracted a whopping 80 per cent.
McTaggart spoke of the ‘new normal’ in the US, a term given to the landscape post GFC.
“Where large companies fall, others prop up in their place. Entrepreneurialism in the US will keep it as the most vibrant economy in the world.”
McTaggart reiterated Australia’s two-speed economy would build momentum given its (still) robust financial services sector, initial high interest rates (room to move), falling oil and petrol prices and variable rate mortgages.
But he says inbound international tourism will continue to decrease given an overvalued Australian currency. This has resulted in Australia flipping from an exporter of tourism to becoming an importer as large numbers of Australians flock overseas on the wing of a strong Aussie dollar and heavily discounted flights.
Closer to home, McTaggart says Queensland will do ‘reasonably well’. But he says its international migration, not interstate, that will help bolster growth in the Sunshine State. Queensland is now the third fastest growing state behind Victoria and NSW. It has slipped from the No.1 spot in the last 12 months.
In a parting shot the often satirical economist fired a salvo at local and state government regarding building approvals.
“One question I would like answered is why are development approvals and population growth negatively correlated? This has to be the only state where as population increases, approvals for new housing decreases.”
Property analyst Michael Matusik, says the construction industry will face potential oversupply in 2011. He also dismissed rhetoric of an investor return to the market as false.
The Gold Coast has more unoccupied dwellings than any other city in Australia at 215,880, or 11.2 per cent.