Watercooler talk: Tale of 2 economies – USA and Australia
Two surprising and shocking news out of USA (one at the start and one at the end of the week) makes us Australians ponder whether we are ready to weather the storm brewing globally. Two major continents/ economies (USA, Europe) are on boiler-plates. The week started with the news of Google’s entry into hardware business (with the acquisition of Motorola Mobility); and the week ended with HP’s exit from hardware business. With a slew of not-so-bad but not-so-heartening economic news from US, the markets panicked. Safe Havens Gold, Yen appreciated considerably. HP’s news was long overdue; hardware business is no longer profitable. Appointment of Leo Apothekar (ex-SAP) was a sign that HP was heading towards a software-driven business model. The announcement took a lot of courage, quite a few months and definitely at a cost (HP will bear the loss of its Touchpad – the shortest lived hardware product ever launched). Google’s decision to enter a low margin hardware business is driven largely by the patent war brewing between Apple, Microsoft, and Google. On the other hand, the burning issues in Australia this week were the ill-treatment of Australian cattle at Turkish abattoirs; illegal boat of asylum seekers and offshore immigration centres. Australian PM continues to promise to return the budget to surplus by 2013. That is laudable, though as is typical with politicians, does she suffer from economic myopia? The booming resource sector relies heavily on demand from China/ India. How the proposed carbon tax will impact the sector in combination with economic situation in China vis-a-vis its (China’s) major customer, USA, is uncertain. Though the politicians rely heavily on Treasury statistics to support their case, they tend to ignore Ministry advise when it does not suit their political ends. With all the uncertainties globally, how well can Australian economy hold its own? A Tsunami at distant shores would cause (at least) minor ripples here. Parting thought: At the turn of every divisive event in US history, there has been a towering figure (Franklin, Lincoln, FDR) that paddled the economy to safe shores. Whose shoulders will that responsibility lie on, this time round? If you look at the line-up of Presidential candidates for 2012, there does not seem much hope. Shall we return to the talk of alternative global reserve currency, if that helps?