The important tourism and overseas-education industries have been hit very hard by the high A$ and the former has also been heavily affected by the floods. Retail spending fell sharply last month according to yesterday’s data and house prices are also slipping. The Australian economy is hugely reliant on Chinese demand for minerals and any blip there would have enormous consequences for the entire economy.
With this backdrop, the Australian Treasurer is set to deliver a very tough budget next week. If Chinese mineral demand starts slowing at a time when the government is introducing severe spending cuts, then the economy could receive some nasty shocks.
