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.