DB says a recession in 2013 is a risk as projects are mining projects are scaled back and delayed due to lower commodity prices.
Australia’s terms or trade, or the difference between what the country is paid for exports and what it pays for imports, may collapse by as much as 15 per cent in 2012, said Adam Boyton, Deutsche Bank chief economist, Australia.
“Over the past 50 years, such declines in the terms of trade have been seen only five times. In three out of those five instances, the economy entered recession,” he said, adding that there was “over confidence that the investment pipeline is locked in”.
Australia boasts nearly a half-trillion dollars in planned investments, according to the report but cracks are beginning to show. For example, a report today says BHP is expected to delay a A$20 billion project to expand the world’s biggest iron ore harbor.
What’s important to remember is that Australia’s economy (and dollar) have been driven by investment in commodity projects, not by the export of those commodities. When the investment dries up (the RBA predicts it will peak in 2013-14) then AUD will have peaked as well.
