Australian Economy Fails To Make Up For Decline In Mining Investments Says JP Morgan

The Australian economy is failing to make up for the decline in the country’s mining investments. A research note from JP Morgan said Australia is “sliding down the precipice” due to slow reform efforts leading to “recession-like” conditions.

JP Morgan analyst Stephen Walters said the firm has known for some time that the plunge in mining investments in Australia was approaching. The analyst added that as previously expected, the country’s economy is now at a slow pace as the sector moves from expansion to production. Investment in Australia’s resources sector has been slow to appear.

Investments outside of the mining sector remained poor as Walters blamed it on several reasons. He said Australia has a persistently “low and fragile” business sentiment as indicated in the business surveys of the National Australian Bank and Australian Chamber of Commerce and Industry, reports the Sydney Morning Herald.

JP Morgan has also warned of the effects of recent setbacks for public investment in Australia. The plans of federal government to subsidise state government infrastructure spending may be in danger. The firm believes infrastructure may be under pressure due to high population growth. The costs of doing business in the country have been also identified as one of the reasons for poor investment outside of the mining sector.

Walters said an unstable political environment is also contributing to the difficulty of making reforms more difficult. The analyst predicted that the Reserve Bank of Australia might attempt to hide the economy’s structural weaknesses by easing policies which could lower the Australian dollar. He added that JP Morgan expects another rate cut in May if economic conditions worsen.

The country’s unemployment rate has soared to levels not seen in 13 years, according to new economic data released last week. The Australian Bureau of Statistics said the unemployment rate has spiked to 6.4 percent, the worst jobless rate the country has recorded since 2002, reports CNBC.

Australia’s small businesses are expecting a tough year ahead as a new small business survey revealed they are not so optimistic on most key measures of activity. The poll by the Australian Chamber of Commerce and Industry said small businesses had a gloomier outlook compared to large corporations. Small businesses expect a decline in profits, investment and selling prices in 2015.

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