mrd

Inflation is rising around the world and in the US, but former Fed Chairman, Alan Greenspan, warned last week that the US was in danger of sliding into a recession next year. The prospect of slowing or non-existent growth against a background of sticky high inflation has old market hands shaking their heads. We have reassured ourselves that Australia is on a different track. Our economy is marching to the drum of China and India, and even if the world’s great consumer economies in the US, Europe and Japan buy fewer goods and services from these developing giants, their rapid industrialisation and infrastructure needs will feed a healthy appetite for our raw materials. But the local share market -nearly 8% off its peak of seven weeks ago -seems to think there are limits to this immunity to contagion from the great northern hemisphere markets. There is no need to panic; but this is not the time to go out on limb.

Source: ITP – Matusik, The Australian Financial Review, Page 46 Opinion, 18 December 2007.