SYDNEY (Dow Jones)
Dow Chemical Co.'s (DOW) chief executive said Tuesday that he sees signs of a coming downturn in the Australian economy, arguing that jobs growth and overall competitiveness are in decline.
Andrew Liveris was unveiling a plan to resurrect Australia's manufacturing sector at a conference held at the University of Technology in Sydney.
"We are seeing troubling signs for our economy at large, maybe even signs of a coming downturn," he said. Liveris said Australia's current growth trajectory is "unsustainable" and that the country had grown far too reliant on China for its prosperity.
The comments add to a recent torrent of weak data pointing to a slowdown in the commodity-rich economy. They come as investors grow nervous about a slowdown in China, which will affect every part of the Australian economy.
Liveris noted that over the past 50 years, Australia's manufacturing sector has shrunk from nearly a third of the overall economy to just 8.6% today. Even the troubled U.S. manufacturing sector makes up 11% of the world's biggest economy, he said.
"We have seen factories and the jobs in them shipped overseas as other countries become more competitive and we've become less," he said.
Liveris said further contraction in Australian manufacturing risked sending it toward a "tipping point," saying the high Australian dollar had made it uncompetitive.
The Australian dollar weakened on the comments, dropping by a quarter of a U.S. dollar to touch an intraday low of US$1.0502. At 0545 GMT, it was trading at US$1.0515.
"Unfortunately, we have seen a lot of warning signs in recent months," Liveris said. "Australia has seen its employment growth slow, its global competitiveness indicators are actually falling and its GDP growth rate is indeed slipping."
The outlook for the economy is changing, he added. The economy grew by just 0.4% in the fourth quarter of 2011, half the pace expected by economists. Job creation in 2011 was flat.
"You could reach the conclusion that with all these indicators that Australia's current growth trajectory is in fact unsustainable," Liveris said.
Australia is not doing enough to adapt to the changing global economy and has grown too dependent on China for its prosperity, he added. China is Australia's biggest trading partner buying vast amounts of iron ore, coal and gas.
Manufacturing activity in Australia contracted for 9 out of 12 months in 2011, and the rising Australian dollar means the situation in the sector has become unsustainable, he said.
The Australian dollar has risen by around 75% since late 2008, transferring a huge burden onto exports. Large manufacturers like car makers are openly debating their future, while plant closure and lay-offs are a frequent event in the sector.
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