Economics: Fat Cows and Skinny Cows

BRW painted a common theme in several articles of its 19-25 August 2004 edition 'Australians have been on an unprecedented buying binge – in the future it wil have to end'.

The theme runs along the lines taht - Australia is over-reliant of its resources sector to drive the economy – especially exports to China…Savings are falling but assets are rising…we spend more than we earn…then we eat into our property gains to finance consumption…Eventually there will be no more equity to borrow…interest rates will rise…real disposable incomes will fall…retail growth is likely to fall back to zero…

Worrying stuff...

Even Michael Chaney predicts several years of grwoth driven by resource exports to China but goes on to state :

"Extending the Argentini model* to macro-economics...Of concern is Australia’s current account deficit and the level of debt in relation to Gross Domestic Product. "You just cant go on consuming and consuming forever"

Lets not ignore economic fundamentals as many did in the ".com" boom. I dont want to sound pessimistic but its sounds to me as if seven skinny cows may soon eat seven fat cows or something of the like.

(*The Argentini-model is all about living beyond your means. Spending without creating real value. Argentina’s economy fell over-time from having a top 10 standard of living to now being considered a relatively poor nation after its severe Financial Crisis in the 1990’s.)