Growth in China will keep commodity prices high for a few more years, even as much of the Australian equity market continues to battle in the new economic environment, according to Platypus Asset Management.
Aside from mining companies and major banks, the core industrial base of Australian companies has hardly grown since the global financial crisis, and the earnings outlook for most of the market over the next 12 months is flat at best, said Donald Williams, Platypus founder and chief investment officer.
Key factors in recent and ongoing market sluggishness include the Reserve Bank of Australia, which has hiked rates in order to blunt inflation with little regard for the domestic economy; a strong Australian dollar, which has hurt exposed sectors such as tourism or those that rely on exports; and Federal Government policy, Williams said.
Uncertainty over policy and new taxes in the pipeline had both caused concern for domestic and foreign investors, he said.
Williams said he was “sceptical of the China sceptics”, and added that policy errors seem to be less common in China, and he had confidence they could improve the wealth and income of the population without major disruptions or inflationary problems.
The economy could continue to go sideways for several more years but the commodity boom still has quite a way to run, he said.
