Wishful thinking, or is there really a change for good blowing through the global economy?
The answer to that question seems to depend on where you’re sitting with optimism breaking out in Australia’s backyard, the Asia Pacific region, and gloom still dominant in Europe.
Two significant flashes of confidence were noticed over the past days with China’s economy picking up speed, capital investment plans in Australia’s resources sector accelerating rather than slowing as predicted -- and with a third kick along expected later today with another cut in official interest rates.
It is this combination of events which caused one the investment market’s smarter economists, Adam Carr, to deliver a surprisingly buoyant assessment of Australia’s outlook under the heading “busting the bust myth”.
Mr Carr, a former economic adviser in both the Prime Minister’s Department and Commonwealth Treasury, argues that there are prospects for strong growth from both inside and outside the Australian mining sector, signalling that: “the economy will bounce back strongly in the medium term.”
His forecast comes from the same contrarian rule-book used by Westpac chief economist, Bill Evans, who earlier this year predicted a fall in interest rates when most of his peers were confident that rates would rise.
Mr Evans, famously, was right. If Mr Carr has performed the same trick by daring to swim against a tide of pessimism then investors might need to start adjusting their portfolios to take advantage of what might be the beginning of a sustained recovery that could see the all ordinaries index reclaim the 5000 point mark.
While Mr Carr can see 2013 being a boom year for Australia there are problems with being too optimistic given the mountainous problems which remain across a number regions.
The U.S., for example, is yet to agree on a course of action to avoid falling off its so-called fiscal cliff, and Europe is in a truly dreadful situation as unemployment soars and many member states of the European Union are trapped in a recessionary spiral.
It is when you get close to Europe, which is what I’m doing over the next few days, that the confidence of people such as Mr Carr is hard to explain because nowhere are there signs of recovery.
It is the poor outlook for Europe which makes it easy for the western world’s leading economic think tank, the Organisation for Economic Cooperation and Development, continue to be concerned about Europe’s malaise triggering a worldwide recession.
Next year, according to the OECD, Europe could shrink by 0.4 per cent, dragging down demand for goods provided by faster growing parts of the world, such as China.
Getting a better measure of the worldwide economy and demand for Australia’s major mineral and energy exports will be possible over the next few days at London’s annual Mines and Money conference which is expected to attract more than 3000 delegates, many from Australia.
Such a concentration of miners and bankers should help answer the question of whether there really are hopeful signs of recovery, or whether 2013 will bring a continuation of slow growth an uncertainty.
Right now, on the eve of the event, the mood in London is very far removed from Mr Carr’s confidence with small miners struggling to raise funds for even the best projects, and for commodity analysts to see little evidence of a sustained upturn in demand and prices.
But, just as Bill Evans dared to be different about interest rates and proved the consensus view to be wrong, so too could Mr Carr’s courageous call of a boom in 2013, turn out to be correct.
