In this video Yvette Roper of TradingFloor.com video interviews Andrew Robinson, Market Analyst for Saxo Capital Markets in Singapore about the Australian economy which is perhaps starting to suffer from the global slowdown.

Australia’s Q2 GDP figures were quite solid. A fairly good contribution from household spending was a surprise, particularly considering that the rest of the economy, apart from the mining sector, is really struggling, says Andrew. Australia is however facing headwinds, mainly stemming from the China slowdown threat and its impact on the mining and resource sector. The third quarter could well be a struggle and as such it might be difficult for the Reserve Bank of Australia to achieve its 3.75 percent growth forecast for the year, says Andrew.

At its latest policy meeting the Reserve Bank of Australia kept its benchmark rate unchanged at 3.5 percent for the third straight month. In light of the worsening China situation and the subsequent effect on the Australian economy expectations are increasing that the RBA will cuts its key rate at its next meeting on October 2. The market expects a 50 percent chance of a 25 basis point cut. “The chances are now more likely than they were at the beginning of this month,” says Andrew.

The Australian dollar has also been struggling of late as pure fundamentals finally catch up with this otherwise strong commodity driven currency. In the last month alone it has fallen 4.2 percent against the USD, 4.6 percent against the JPY and a massive 6.7 percent against the EUR. It has fallen the most against the latter currency because the Euro has seen some recovery in anticipation of European Central Bank rescue measures for troubled European nations. “The few props that have supported the Aussie dollar over the last 18 months to 2 years are slowly being eroded away,” says Andrew.

Andrew also commented on the latest employment figures from Australia which on a headline basis were poor with 8,800 jobs lost to the economy in August. Closer scrutiny of the data revealed that all the job losses were in the part-time category, with just a few jobs added in the full-time category. “That took a bit of the sting out of the negativity of the headline,” says Andrew. The unemployment rate improved to 5.1 percent but this can be largely explained by a fall in the participation rate to 65 percent from 65.2 percent, which is the lowest it has been since October 2007.

See more of Andrew's Asian market commentary on TradingFloor.com