Biggest Economic Threat For Australia

It might surprise you to hear this, however …

h3. A Strong US Recovery

… would probably be the worst thing to happen for Australia in 2010.

If that occurs, the US Federal Reserve would be forced to quickly raise interest rates, from zero to around 3%. And that would cause the collapse in the Australian dollar from its current level of around US90c.

Up until now, Australia has been shielded from inflationary pressures, with a high dollar holding down the cost of imports.
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Year-end Recap, on Where Things Stand!

During October, business borrowing actually expanded by a healthy 1.1 per cent — to be 13.2 per cent for the 12-month period.

However, business debt and credit cards are considered more risky than home loans. Therefore, banks will raise their risk premium in these two areas; and not lower those lending rates, as much as the RBA’s official rate cuts.
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