Manufacturers are in a healthy position to ride major drops on the Australian Stock Exchange (ASX) like the one seen this week, a leading economist has assured.
Greg McKenna, AxiTrader’s chief market strategist, has told Manufacturers’ Monthly there isn’t much cause for concern despite the ASX suffering a $26 billion loss on Thursday, claiming that the industry is sufficiently prepared.
The slide was partly blamed on concerns surrounding the United States’ “pro-growth agenda” and an uncertain future for the American health care system.
However, while he says it is not yet clear whether President Trump is going to be “a great fiscal manager”, McKenna believes a turbulent marketplace isn’t solely a US trade issue.
“It’s not just about the US stock. We had a bottom out in the commodity cycle last February, so it looks like this is a long-term situation,” he said.
“That said, the prices we have got to are pretty precise… and, in the current environment for business, are starting to change people’s views [of the market].
“As long as the Australian dollar doesn’t go much higher and companies continue to make good products, it is a good time for manufacturing.”
As the economy continues its transition after the mining boom of the early 21st century, manufacturers in Australia “know how to work with and do business in a market that’s prone to booms and busts”, according to McKenna’s research.
He explained that, while “the industry’s economy has shrunk” in the past 20 years with fewer bodies on factory floors, manufacturing has actually “benefitted from global growth over the last six months”.
“When that happens – whether on a domestic front or offshore – it is positive for the industry,” he continued.
“In that case, manufacturers will be able to manage their productivity. From experience, they have always been very adaptable.”