Australia, the Lucky Country, could be heading for a fall, according to noted Chinawatcher Andy Xie:
Australia's economy is dangerously dependent on China and the central bank will have to cut rates aggressively to protect the resource-rich nation from a slowdown comparable with that seen in struggling European states like Spain, said Andy Xie, an independent Shanghai-based economist and adviser to several Chinese banks.
"Australia has a serious Dutch disease," said Mr. Xie, who was formerly chief economist for Morgan Stanley in Asia. "Australia needs to ease the currency down as quickly as possible to prevent a crash in the property market. Once the bubble bursts, if you let the currency stay at the same level, you'll see what we saw in Spain," he said in the recent interview.
Mr. Xie warns that foreign investment, largely directed towards large mining and energy projects, will slump from its current level of just under half of gross domestic product, or GDP. This he argues will spark a downturn in the Australian property market that could see house prices drop by between 20% and 30%.
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