Australia pinched by Asia crisis

Australia pinched by Asia crisis

By Sid Astbury

SYDNEY (DPA): Malaysia's prickly Prime Minister, Dr Mahathir Mohamad, famously said of Australians that they were uncertain where their loyalties lay:

"When Europe was top dog they wanted to be Europeans; when the United States became the superpower they wanted to be seen as Americans; when Asia became the focus of economic activity they wanted to be part of Asia."

But with Asia in economic turmoil, Australians are unhappy with the proof of membership of their latest club: a plunging currency, a sagging stock market, growth forecasts that are pruned regularly and politicians who assure them all will be right in the end.

After a decade and more of seeking closer engagement with the region, Australian leaders now protest that their economy is being unfairly bundled with Asia's wobblies. Treasurer Peter Costello, has this to say about Asia's downturn: "It will have an effect on exports, but it's not a major part of the Australian economy".

People outside the region, beg to differ. They see the scale of Australia's economic enmeshment with the region and warn that the Lucky Country can't help but be sucked into the maelstrom. More than 60 percent of Australia's tourists are from Asia, 60 percent of its exports go there and lots of Australian jobs depend on continuing Asian investment.

Speaking in New York recently to a group of Australian company executives, Massachusetts Financial Services vice president Leslie Nanberg told it like it is: "You always wanted to be seen as Asian. Now you are".

Every day figures come out that show Australia will be deeply hurt by Asia's travails.

The National Farmers Federation warned last week that beef and wheat exports to Asia are threatened because of successive currency crises that have lifted the cost of Australia produce on some Asian supermarket shelves by upwards of a third. This week analysts were warning that thermal coal producers might face savage price cuts for next year's export contracts with up to half of Australia's steaming coal mines facing closure in the next five years.

It's not the troubles in Southeast Asia that will hurt the most, as those markets take just 10 percent of exports. The meltdown in Japan and Korea, Australia's two largest export markets, will hit the hardest. John Sutton, an executive of Commonwealth Bank, puts it this way: "We are caught in this story in Asia. The won is down, the Nikkei is down, and a lot of our exports are going up there."

Just a month ago the government was claiming that the Asian crisis would shave less than half a percentage point off next year's projected growth rate of 4.25 percent. Now, with the Aussie dollar and the stock exchange in retreat, the sums are being done again and the outlook is getting much bleaker.

Westpac Banking Corp's Bill Evans, one of the country's most respected economists, has downgraded his guess at 1998 growth from 4 percent to 3 percent. Evans, and other top analysts, don't bother to deny that Asia's problems are fast flowing on to Australia and that international fund managers are right to group Australia and New Zealand with the economies to their north.

If there is a bright side to all this, it's that Australia is at last being tarred with the same brush as Asia and not being treated as a western economic enclave. Engagement is a reality.