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As Australia stumbles, will Canada follow suit?

Predictions of a hard landing for the resource-rich Australian economy have Canadians wondering whether our economy will share the same fate. The answer is likely not, although for investors a painful transition may be ahead.

Former Morgan Stanley economist Andy Xie presented a compelling argument that Australia was on the verge of a hard landing. Mr. Xie argues that, just as in Canada, the sharp increase in Australian GDP over the past decade is a direct result of capital inflows from China, the vast majority of which relates to resource exports. He believes the current slowdown in Chinese growth will see a reversal of this process: