CQUniversity Australia

Forecast comes true as over-supply drives commodity prices down 

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Academics based at CQUniversity's Sydney Campus have correctly forecast that Australia would increase supply too much during the current mining boom and drive down commodity prices.

Dr David Fox, Noel Ross and Claudia Wee* recently published their 'Forecasts for the Chinese Economy and the Implications for Australia' in the Journal of International Business Management and Research.

"The authors believe that Chinese economic domination will take place sooner than most would expect," they say. "China is forecast to have a larger economy than the USA before the year 2015."

The authors say the 'greatest danger' to Australia and resource companies is that the Chinese will be able to duplicate Japanese strategies (from the boom of the 1960s) and stimulate new resource projects that will cause a glut and bring down prices.

"The promise of the 1960s was not fulfilled because the Japanese stimulated so many mines that the market was glutted and prices slumped," the authors say.

The published paper makes forecasts for the size of the Chinese economy using a future value model of the Gross Domestic Products (GDP) and Purchasing Power Parity (PPP).

"China's domination will start before 2015 and the Middle Kingdom will take its place once again at the top of the heap," the authors say.

"For China to overtake the USA it will need to develop leading-edge technologies and companies and products such as Microsoft and iPods. China has not done this yet although China has done it in the past with gunpowder and porcelain."

* a former employee of CQUniversity.