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Risk of “Dutch disease” in Russia-Aus trade: strong export energy sector could crowd-out other sectors, warns Austrade economist

Posted by gasweek on 28 September, 2007

Austrade chief economist Tim Harcourt said the Russian President’s visit to Australia during APEC reflected an increasingly healthy Australia-Russia trade relationship, reported The Australian Financial Review (29/8/2007, p.13). Big turnaround for Russia: Harcourt said Russia had staged a remarkable turnaround since the post-Cold War period. He said relative trade economic stability, thanks to large natural gas and oil reserves, a worldwide boom in commodity prices and increased foreign investment had helped Russia average 7 per cent growth. Among the Australian companies doing well were BHP Billiton and Rio Tinto, each of which had major investments in Russia through joint ventures with Norilsk Nickel. But Harcourt said Russia’s outward investment was the real story. Norilsk, Gazprom, Rosneft, Lukoil and Rusal were all aggressively looking for overseas opportunities.

Warnings of shock: There had been a 65 per cent rise in a two-way trade to $719 million in 2006, and Australian meat and wine exports were booming. The Russian resources boom was generating opportunities for Australian service providers in energy technology and infrastructure. But Harcourt warned there could be a risk of “Dutch disease”, where a strong export sector could crowd out other sectors, unless the economic base was broadened to guard against any adverse shock from depending on a strong energy sector.

The Australian Financial Review, 29/8/2007, p. 13


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