MB alumnus turned Business Insider scribbler Greg McKenna made an interesting observation yesterday:
Even though iron ore is Australia’s largest export, accounting for around 22% of total exports, it still only accounts for 4% of GDP.
That’s why this chart on the correlation between the Australian Government-US Treasury spread and the price of iron ore is so startling.
It shows the impact of market sentiment on asset prices and differentials. It’s also an amazingly strong directional correlation, given the impact of iron ore on the terms of trade.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
Even though iron ore is Australia’s largest export, accounting for around 22% of total exports, it still only accounts for 4% of GDP.
