Could the Global Financial Crisis Happen again? Is Australia to Dependent on China?
Global financial crisis is one of the challenges that most countries are facing today. Workers losing their jobs, diminishing purchases, the government depleting financial resources, problems in importing and exporting goods –these are just few of the situations when the global financial crises strike. Countries were affected, especially those who are independent to China, who happened to be one of the largest economies in the world today. Luckily, Australia is one of the self-sustaining countries which were slightly affected by the crisis.
What is global financial crisis?
Global financial crisis is a worldwide economic period when every country – both consumers and markets experience difficulty. This results to consumers’ decision to reduce their purchases – both goods and services, giving businesses a hard time to recover. In the situation between countries, nations simultaneously conclude that their financial contracts with other nations or financial institutions will be affected.
During these times, financial institutions like banks demand early payment for loans so that they will be able to liquidate their finances in a short period of time and maximize their assets. This creates a ‘frozen’ financial market and trading will be affected, too.
Why global financial crisis occur?
It is an inevitable period of economy and finances that all nations experience. This may be accounted to banks creating too much money and allowing people to get more and more loans but they don’t have the capacity to pay. As a result, there will be huge debt in the financial market. These debts will double over time because people no longer have money to pay for it. Debts create interest over and over again. People tend to have low credit line and banks will refuse to lend more money to them.
Australia’s dependency on China
China’s economy began to propel in 2007 when they offered the lowest labor cost and biggest force in the world. It also began to export goods to many parts of the world, including Australia, and it didn’t stop or decline over the years.
Unfortunately, Australia is now considered as one of the most China-dependent economies. The country’s exports to China have grown from 8.5% of the total in 2003-04 to 32.5% in 2013-14. This figure is expected to continue growing in the coming years.
Financial crisis and its reoccurrence
With the current real estate and mortgage status, many people fear that financial crisis would strike again and that it will affect many outstanding mortgages. There is no guarantee that the crisis will never happen again. But as consumers, you need to look at your finances and make sure that you are ready for it. Do not create too much debt that you won’t be able to settle immediately. Mortgage is a good choice, provided that the economic status and real estate industry are in good and stable condition. It is also important to save up for emergency situations and secure your money in good investments. Ask your bank about the current market standing and plan your future.
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