ID :
197876
Thu, 07/28/2011 - 14:05
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Shortlink :
https://oananews.org//node/197876
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US a worry, but rates may still rise here
SYDNEY (AAP) - July 28 - Financial markets are becoming increasingly jittery about the world's richest economy defaulting on its debt as the August 2 deadline draws ever closer.
Failure by US President Barack Obama's Democrats and their Republican rival to nut out a deal before then - that cuts public spending and raise borrowing limits - will have major ramifications for the global economy.
August 2 also marks the Reserve Bank of Australia's monthly board meeting, with one major Australian bank predicting the central bank will raise the cash rate following Wednesday strong inflation figures.
Australian Treasurer Wayne Swan again called for a speedy resolution to the US political impasse.
"I think like most finance ministers and government around the world, we'd like to see a speedy resolution of this matter, both in the United States and of course issues within Europe," Mr Swan told reporters in Sydney on Thursday.
The local share market dropped over 1.5 per cent on Thursday after a weak lead from Wall Street, while the Australian dollar remained comfortably above 110 US cents, benefiting by renewed speculation about a local interest rate rise.
Mr Swan said what was being witnessed in the US was the impact of the right-wing Tea Party movement in the Congress.
"This is the movement that seems to have taken over the modern Liberal party in Australia and they both seem to be employing the same sorts of tactics," the treasurer said.
"Out there, talking down the country, threatening good public policy."
The same could not be said about the boss of one of Australia's largest banks, saying people are being overly pessimistic about the economy and should focus instead on its underlying strengths.
"There's a lot of caution, I think really more than, given the underlying fundamentals in Australia, there should be," Westpac chief executive Gail Kelly told a business luncheon on Thursday.
She pointed to the booming resources sector, which has Australia's terms of trade - the ratio of export prices to import prices - at near record levels, as a key strength.
But Mrs Kelly acknowledged many sectors of the economy, particularly those exposed to consumers' discretionary spending, were doing it tough.
Economists at Westpac had recently forecast the next move in the RBA's cash rate to be down, predicting a cut in December because of the unsettled global economy.
However, financial markets have moved away from that idea following Wednesday's inflation data, and despite the continued worries over the US debt problems.
They are now factoring in a greater than 10 per cent chance of an interest rate rise next Tuesday.
ANZ economists are even more confident, saying the RBA will lift the cash rate to 5.0 per cent from 4.75 per cent at the meeting.
In an analysis, its economists Warren Hogan and Katie Dean said Wednesday's June quarter inflation numbers were "uncomfortably high".
"A small upward adjustment to interest rates now could well save the Australian economy from a painful series of rate hikes in 2012," they said.
The official cash rate has stood at 4.75 per cent since last November.
Failure by US President Barack Obama's Democrats and their Republican rival to nut out a deal before then - that cuts public spending and raise borrowing limits - will have major ramifications for the global economy.
August 2 also marks the Reserve Bank of Australia's monthly board meeting, with one major Australian bank predicting the central bank will raise the cash rate following Wednesday strong inflation figures.
Australian Treasurer Wayne Swan again called for a speedy resolution to the US political impasse.
"I think like most finance ministers and government around the world, we'd like to see a speedy resolution of this matter, both in the United States and of course issues within Europe," Mr Swan told reporters in Sydney on Thursday.
The local share market dropped over 1.5 per cent on Thursday after a weak lead from Wall Street, while the Australian dollar remained comfortably above 110 US cents, benefiting by renewed speculation about a local interest rate rise.
Mr Swan said what was being witnessed in the US was the impact of the right-wing Tea Party movement in the Congress.
"This is the movement that seems to have taken over the modern Liberal party in Australia and they both seem to be employing the same sorts of tactics," the treasurer said.
"Out there, talking down the country, threatening good public policy."
The same could not be said about the boss of one of Australia's largest banks, saying people are being overly pessimistic about the economy and should focus instead on its underlying strengths.
"There's a lot of caution, I think really more than, given the underlying fundamentals in Australia, there should be," Westpac chief executive Gail Kelly told a business luncheon on Thursday.
She pointed to the booming resources sector, which has Australia's terms of trade - the ratio of export prices to import prices - at near record levels, as a key strength.
But Mrs Kelly acknowledged many sectors of the economy, particularly those exposed to consumers' discretionary spending, were doing it tough.
Economists at Westpac had recently forecast the next move in the RBA's cash rate to be down, predicting a cut in December because of the unsettled global economy.
However, financial markets have moved away from that idea following Wednesday's inflation data, and despite the continued worries over the US debt problems.
They are now factoring in a greater than 10 per cent chance of an interest rate rise next Tuesday.
ANZ economists are even more confident, saying the RBA will lift the cash rate to 5.0 per cent from 4.75 per cent at the meeting.
In an analysis, its economists Warren Hogan and Katie Dean said Wednesday's June quarter inflation numbers were "uncomfortably high".
"A small upward adjustment to interest rates now could well save the Australian economy from a painful series of rate hikes in 2012," they said.
The official cash rate has stood at 4.75 per cent since last November.
