Sober Look | Nov 26, 2012 01:39AM ET
Australian mining investment growth has been tremendous in the past couple of years, with current financial year inflow of some 7% of the GDP. Companies like Fortescue have tapped the hot US junk bond market to pump cash into mining operations. At the same time non-mining investment has been declining, making Australia's economy more vulnerable to a downturn in demand for raw materials.
Merrill Lynch (Australia): ... in our view the case for further easing isn't substantially data dependent. Rather, it is based on the need to nurture alternative sources of economic growth as the mining investment boom approaches its peak, and a recognition that – in the face of the substantial "headwinds" confronting those alternative sources of growth (such as the persistent strength of the AUD, depressed business confidence, and ongoing fiscal consolidation) – further support from monetary policy is likely to be needed in order to ensure that this "baton change" in the drivers of growth happens smoothly.
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