World banking giant HSBC has released a positive review of Australia’s economic fundamentals in its Australia in 2012: The ‘lucky country looks set for another solid year’ report, which suggest that solid macroeconomic policies and the ongoing commodities boom positions the country to weather any global financial storms.

 

While the report details a generally positive prospectus for the country’s economy, it warns of a possible downturn in commodity demand from China and the overall effects of a global economic downturn.

 

The report also warns of an emerging two speed economy, with the mining sector set to account for an estimated two thirds of the economy’s growth in 2012.

 

“The resources sector will be a key support for growth, but it is also crowding out other sectors of the economy,” the report reads.

 

The report also praises the continued strength of the country’s fiscal policy, finding that despite overall global economic uncertainty, there was still scope for the use of traditional macroeconomic management.

 

“Given the low level of government debt, a fiscal response to a sharper than expected global downturn could also be implemented if necessary – although the government would be forced to concede its political imperative to return to surplus by 2012-13,” the report found.

 

The report comes after Roy Morgan released findings that show business confidence has risen for the fifth consecutive month to finish at 117.2 in December.

 

The major reason for the lift in confidence from July through to December 2011 has been a big increase in the proportion of businesses considering that “Australia will have good economic conditions in the next 12 months”. Currently 59% consider that conditions will be good, compared to only 43% in July 2011.

 

“The most positive industry outlook comes from Mining and Finance, whilst the least optimistic are Wholesale Trade, Construction, Manufacturing, Retail and Agriculture. Figures just out for 2011 show a record number of insolvencies in Construction and Retail which support the negative feelings in these industries, as does the drop in job vacancies in Retail and Manufacturing in contrast to the increase in job vacancies in Mining,” Norman Morris, Industry Communications Director, Roy Morgan said.