The Fiscal Cliff – what does it mean for us as Australians?

Some people think that we are shielded by anything happening in the US by our proximity to Asia and in particular by China, our largest trading partner. This is not correct. The world is a very small place and the USA is still a very important country when it comes to global economic policy and in particular Australia.

Our top ten trading partners are China followed by Japan, USA, Singapore, United Kingdom, Korea, New Zealand, Thailand, Germany and Malaysia. So as you can see the USA is a very important partner to Australia and to the Australian economy.

The fall of the USA over the ‘fiscal cliff’ would essentially create a recession in the USA, and conversely would mean that obtaining finance by corporations and Small and Medium Businesses (SME’s) will become more difficult due to less money being available to loan; the cost of imports from our top trading partners would increase; and the general share market would become shaky.

We are already into a new year and with a new year come’s a new optimism. Optimism is the true backbone of the economy and that is what the markets rely on.

Never the less we still have to get up in the morning, go to work, pay our bills and get on with it. Most of us believe that after every bust there’s a boom and it’s worth the wait.