Way Open For Orderly Growth In Australia

Press, Volume CVII, Issue 31543, 4 December 1967, Page 17

Way Open For Orderly Growth In Australia

Now that Britain and New Zealand have devalued, and a considerable period of currency stability may be expected, New Zealand investors will have to reconsider their attitude to the Australian share market.

With currency speculation out of the way, decisions whether to invest in Australian scrip must now be more

closely related to orthodox investment principles. As could be expected, the Australian market reacted unfavourably to Australia’s decision not to devalue. However, for a few days after the initial shock it looked as if the market would take the decision in its stride, and resume the bullish trend of the last few months. Index Trend From the last day before the devaluation, when the Sydney all-ordinaries index had reached a peak of 473.48, daily indices have been as follows: 473.48, —, 461.52, 465.10, 471.52, 467.22, 463.98, 457.95, 448.64, 441.68, and 438.62 last Friday. As can be seen, second thoughts reversed the trend, and, after the situation becomes more settled, profit takers may come off best. Australian exports will come under pressure, and especially the farm sector may find things difficult for a while. Already there has been talk of phasing-out the dairy industry. Adjustments No matter how sensible such a restructuring may be

i from a long-term point of i view, the short-term adjust- • meats are bound to be pain- • ful.

In a general way, and everything else being equal—as economists are fond of pointing out—an excess of imports over exports will have a deflationary effect. Everything is not going to be equal, of course; for instance, the Australian Government has-announced its intention of introducing export incentives. But the Australian economy was only just getting into gear, after amitation over the last few years, and the recent events may be a check to growth, even if temporary. Not surprisingly, the stocks with the greatest amount of “bubble’’ are taking the hard-

est knocks, now that the market is in a more sober mood. Economy Sound Basically, the Australian economy is sound as a bell, and promises investors better growth prospects than in New Zealand. Over the last 40 years the Australian sharemarket has outperformed its New Zealand counterpart handsomely. But some Australian shares are overpriced, and with the speculative prop knocked from under them, will have to settle for more realistic levels.

And once over this new hurdle, the way is open for steady, orderly, and soundlybased growth, even if it might be less spectacular.