GREENSPAN: CHINESE PRESSURES TO HIT RESOURCES BOOM

GREENSPAN: CHINESE PRESSURES TO HIT RESOURCES BOOM

ONE of world’s most vocal economists today warned Chinese currency revaluation and political pressures will impact on Australia’s resources boom.

Former US Federal Reserve chairman Alan Greenspan (pictured) predicts a higher valued Chinese RMB will intensify economic contraction and political unrest.

“China is being pressured to allow the RMB to rise, but the Communist leadership fears it will bring significant contraction in job creation,” he says.

“The allure of party ideology is long gone, leaving the leadership with only prosperity to offer the people. Unemployment often creates political instability.”

Such developments would reduce demand for Australian iron ore, forcing producers to sell at more competitive prices.

However, Greenspan’s outlook is not entirely bad for the broader mining sector.

“Australia has an extraordinary advantage in delivering resources and is experiencing a very aggressive mining boom,” he told an Australia-Israel Chamber of Commerce breakfast via satellite video-link.

“The danger lies in how there is no way to sterilise adverse effects such as rising interest rates. Norway successfully avoided this scenario despite continued oil production in the North Sea by channelling proceeds into a sovereign wealth fund (SWF).”

Proceeds from SWFs can be used to fund better health services for the ageing population, natural disaster-proofing, Indigenous Australian initiatives and offsetting the new carbon tax.

Greenspan believes downturns are inevitable due to the cyclical nature of market economies.

“In 2008 we had an international lockdown of the stock market, money, mutual funds and global trade credits. We have not experienced such a breakdown of financial institutions since 1907. The global financial crisis was the worst the US had ever faced,” he says.

“However, unless you can change human nature this will continue to happen when dealing with a market economy.”

Get our daily business news

Sign up to our free email news updates.

Please tick to verify that you are not a robot

 

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Top tips for successful digital transformation
Partner Content
Digital transformation, when done well, can transform your organisation's operation...
Advertisement

Related Stories

Early-stage funding hits record high as mega-deals drop off

Early-stage funding hits record high as mega-deals drop off

Despite venture capital funding falling by a third for Australian s...

Owner of Betty's Burgers, Boost Juice returns to Australian hands at $350m valuation

Owner of Betty's Burgers, Boost Juice returns to Australian hands at $350m valuation

The parent company of Boost Juice is set to return to Australian ha...

Emyria, Little Green Pharma shares spike after TGA green light for MDMA and psilocybin

Emyria, Little Green Pharma shares spike after TGA green light for MDMA and psilocybin

Alternative medicines stocks are on a tear today as investors take ...

KKR-backed Alludo presses on with Nitro Software takeover plans, brushes off shareholder rejection

KKR-backed Alludo presses on with Nitro Software takeover plans, brushes off shareholder rejection

A $526.8 million takeover proposal for Nitro Software (ASX: NT...