The Australian economy has to face challenging management problems

Tag : lead,copper
"The speed and weight of money behind this move has been quitebreathtaking," ANZ foreign exchange strategist Tony Morriss said.
The Australian dollar - the world's strongest currency in the firsthalf this year because of its commodities link - has become one ofthe weakest over the past two weeks, falling 10 per cent againstthe US dollar and retreating even against the New Zealand dollar.
The Australian economy will still gain from boom-time prices for some time as sharp iron ore and coal prices are locked in for another 12 months, but previous commodity busts have been steep,and the economy could face challenging management problems,especially on the external account, if the terms of trade reversessharply.
"Commodity booms end ugly, they always do, and there has never beenan exception," Access Economics director Chris Richardson told thenewspaper.
Richardson said it would not be until coal and iron ore prices fellthat the boom would definitively be over for Australia, althoughthe downturn was more serious than the correction in base metalsprices in 2006.
"This downswing is more consistent with the global economicfundamentals," he said, warning that Australia would face seriouseconomic problems if the downturn continued. "The commodity marketsare more central to Australian national income than either creditmarkets or share markets."
The government does not believe world commodity markets havereached a turning point and is pinning hopes on continued growthfrom China, with Treasurer Wayne Swan telling The Australian:"Prices for our commodity exports are still at generational highsand ongoing demand from emerging economies give us some cause foroptimism, despite slowing global growth."
Treasury believes the continuing strength of iron ore and coalmarkets suggests the boom retains some strength.
However, the simultaneous shifts in currency and commodity marketsindicate financial markets now expect a worldwide slowdown over theyear ahead.
Citigroup's New York-based energy analyst, Tim Evans, told thenewspaper evidence had been emerging this year that soaring priceshad changed the balance of supply and demand for oil.
As oil fell, so too did other commodity prices. Gold hit anall-time peak of $US1,032 an ounce in March and was trading at$US965 in mid-July but dropped below $US775 on Friday. Copper hasfallen almost 20 per cent from $US8,950 a tonne on July 2 to$US7,335. Nickel is down from $US32,000 a tonne to below $US18,000.Aluminium, lead and zinc have had similar falls.