Australian Investors Mindful of Taiwan

Japan is reporting that China fired several Ballistic missiles over Taiwan.

You cannot be much more provocative than that.

While many are of the view that Taiwan should be supported as much as possible, the consequences of actual conflict would be extreme indeed for Australia.

Any conflict arising over the dispute between Taiwan and China would quite rapidly potentially involve US forces. At that point, given the latest AUKUS alliance, Australia is immediately automatically involved.

Not only would this create an intense military and security period for our nation, but we would also suffer almost catastrophic changes to the Australian economy.

The retrenchment of consumer and business activity would be almost as immediate as it was during covid lockdowns. Yet longer lasting. 

We would also instantly experience the complete cessation of the purchase of Australia’s raw materials and foods by China. There would be little prospect of positive improvement on this front then, for many years, even decades. 

An immediate depression-like environment would sweep through the Australian landscape. Our economy, despite government support, record crisis low-interest rate settings yet again, would descend into a long recessionary period, well beyond the duration of the actual conflict. 

The economic price would be high. That is not to say such support is not appropriate. The point to be made here though is as Australian investors observe what is occurring regarding Taiwan, it would be wise to already work on an investment hedging crisis plan. 

It is vitally important in this newly volatile world, economically and geo-politically, that we consider all scenarios well in advance of their potential occurrence. Anyone left trying to map all this out in real-time, after such an eventuality has commenced, will not fare well.

We trust there will be no actual conflict, but the consequences for Australia are so extreme we must make ourselves forewarned. With a strong hedge investment plan already at hand.

Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities for BusinessToday

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