Surveys provide mixed readings

THE National Australia Bank’s monthly survey on business conditions suggests an Australian economy outpacing most of the world, with the growth momentum seen in the previous quarter moving into the December quarter.

NAB’s chief economist Alan Oster said in relation to the survey that the influence of the international downturn would be felt increasingly next year, but the solid domestic situation was pointing to Australia avoiding any return to negative growth.

In another survey, however, Reuters stated that fund managers and strategists believe the share market’s recent insulation from offshore jitters may mean its recovery is only modest compared with other major markets. A senior strategist was quoted in a Reuters survey as saying: “we think the Australian market is overvalued at the moment. We don’t think there is as much upside as there is globally”.

Smokes and mirrors abound, as most pundits differ on the outlook for Australian business and the share market generally. The median forecast of the survey found the benchmark index S&P/ASX 200 was expected to hit 3,650 by the end of calendar 2002. The current reading is 3293.

The share market should still provide solid returns for investors seeking yield returns and capital growth, particularly with such a low interest rate environment. The current rationalisation in the resources industry should continue into 2002, with the gold industry, base metals and mineral sands all expecting consolidation.

WMC will be the prime target of any rationalisation, but also Iluka Resources, Sons of Gwalia and a rash of smaller players are expected to come under the spotlight. One company that should seriously be considered in the consolidation is Basin Minerals Limited.

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