Bottom Line: Australia slowdown not a bust

 
Elizabeth Fournier
SUCH is the FTSE’s reliance on mining and commodities stocks that closely watched data from the sector – be it a slowdown in the Chinese economy or a lift in factory output – can make or break a day’s trading.
But as Michael Page proved yesterday, the knock-on effects go even further. The white-collar recruiter said yesterday that gross profits in Australia – its largest business in the Asia Pacific region – fell 20 per cent as the commodities boom that has driven phenomenal Western Australian growth continues to fade.
The dip led its overall profits 11 per cent lower, and shares reacted fast, closing down by four per cent.
For the past decade, whole communities around Perth have sprung up as copper and iron prices headed steadily higher – and miners and shipping firms hired heavily to meet demand, offering premium wage packets to specialist workers and those willing to relocate to often remote hubs of activity. Now the era of unbridled Chinese growth is fading, it is not just sending commodity prices lower, but clearly beginning to stifle hiring practices and intentions too. But the drop in demand shouldn’t be a cause for panic – at least not for Michael Page investors.
Management may be sounding a cautious tone but it has already been offsetting the threat by diversifying revenue streams – pushing into Asian countries as their Pacific neighbours drop back. And shares have climbed 23 per cent in the last six weeks alone – they’re firmly in a recovery cycle that analysts still believe can be supported.
Australia may no longer be booming, but this is no bust.