Times are tough all over

[Aliantha]

All economies are intertwined or entagled to use your words tw. It's only the degree that differs. As I mentioned before, so far, our major banks have weathered the storm very well, and they've gobbled up the couple of smaller ones who've become slightly unstable.

We may be more isolated here and as I also mentioned before, our banks invest very heavily in resources and exploration. This is a market which is performing well here in Australia so things are not so bleak. Also our ability to export natural resources gives us a leg up which many other countries don't have. Our dollar being weaker is good for our export market also, and with the cost of imported products then becoming more expensive, people are encouraged to buy Australian, which in turn boost our economy and keeps it stable, at least in house.

[tw]

Originally Posted by Aliantha

Our dollar being weaker is good for our export market also, and with the cost of imported products then becoming more expensive, people are encouraged to buy Australian, which in turn boost our economy and keeps it stable, at least in house.

That reasoning works to a certain extent. Buy Australian does not make a stronger economy. The strongest economies buy the best - believe in the free market - regardless of where it is made.

Furthermore, an economy heavily dependent on commodity exports is then very dependent on other imports to maintain that economy. That part gets forgotten. The productivity of higher tech industries then gets stifled as the necessary import costs are higher.

Example - a lower dollar means gasoline prices go higher.

Lower dollar is a double edge sword - with good and bad points. But the bottom line: a lower dollar means a lower standard of living. If an economy does not fix its problems, one way that economics takes revenge is to lower the dollar's value and therefore lower the country's standard of living. As a result, the people either work more productively or work more hours.

Another example of 'no free money'.

But again, how have the commodity markets affected the Australian economy?