30 May 2011

Two-speed economy feared for Australia

7:05 am on 30 May 2011

Fears of Australia becoming a two-speed economy are gaining traction after the release of data showing the mining sector is eclipsing every other productive sector.

Radio New Zealand's Sydney correspondent says a boom is one thing. A boom that leaves every other part of the economy struggling is another.

A recent run of Australian data shows record high commodity prices are hurting the areas where people actually live and work.

Radio New Zealand's correspondent says some call it the 'Dutch disease' - after what happened in the Netherlands in the 1960s on the discovery of natural gas there.

Rising gas prices pushed up interest rates and the exchange rate, in turn decimated manufacturing.

Now a senior executive at National Australia Bank has questioned whether Australia is going down the same road.

Householders are squeezed by high interest rates, exporters are hurt by the high Australian dollar and many small to medium enterprises are unable to source loans because the resource sector is soaking up all the capital.