Borrowing Costs in Australia to Continue to be Among Highest in World

Wednesday, April 21st, 2010

With the commodity market booming and prices rising with that demand, Australia will continue to be among the most expensive nations to borrow money in as Chinese demand for raw materials fuels the sector.

According to the International Monetary Fund, gross domestic product in Australia will grow 3 percent in 2010, and 3.5 percent in 2011. That's up from forecasts earlier in the year where growth rates were estimated at 2.5 percent for this year and 3 percent in 2011.

Glenn Stevens, Reserve Bank of Australia Governor, has been aggressively raised borrowing cost in the country, and has signaled he's ready to do more going forward. In five out of the last six meetings Stevens has bumped up the rates.

The major challenge for the Australian economy is its strong reliance on the health of the Chinese economy. Australia has largely missed the ravages of the recession because of the commodity business they do with China, and that continues on to this day.

But with China trying to cool down its economy again, as it continues to want to run, that could have some downside impact on commodity demand.

Although China isn't making major changes, and change in a percentage point could cause huge waves in some prices of raw materials, so that will have to be watched closely.

The positive side of this is Australia does have time, as China is expected to grow strongly for years into the future, and Australia will grow right along with them.

It's how to prepare for the long term when China growth subsides that Australia has to look out for, but fortunately there's a lot of time to work on that, and there's also India in the wings ready to takes its place on the world stage as their middle class grows as well, although not near as fast as China's.

Domestically, both public and private demand is also expected to increase for the year, making it look like there will be a robust economy, when taking into consideration it is not overly reliant of mature economies, but is focused on emerging markets and its own domestic one.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of

Tags: australia , borrowing rates , commodities , interest rates

Related Articles
Australian Mortgages Rates To Drop As All Big banks Cut Rates
RBI deregulation of NRE Deposit Rates
Chairman Bernanke Faces Questions on Inflation
Entrepreneurs and Raising Venture Capital with Rising Interest Rates
Corn Futures Spiking as USDA Reports Decrease in Supply
Australian Business Confidence Down for Second Month in a Row
Canada's Dollar Surges to Highest Level for Day in Year
AngloGold Ashanti (NYSE:AU) CEO Says Australia Has Higher Sovereign Risk than South Africa
Canadian Dollar Plunges Most in Week Since January
Commodities Down as U.S. Dollar Strengthens on U.S., European Debt Concerns
Market Response to Goldman Sachs (NYSE:GS) Fraud Charges Underscores Investor Jitters
Are Copper Prices Ready to Fall as Investor Interest Slows?
Challenges of a Strong Canadian Dollar
World Steel Association Furious Over BHP Billiton (ASE:BHP) and Rio Tinto (TSE:RIO) and Vale SA Contract Changes
Give Your Opinion
Types of pension funds?
Share a simple answer to help inform others:
Specific to any country?
First name / Alias

• Your answer will be posted here:
Types of pension funds?
Financial Questions & Answers
Ask A Question
Get opinions on what you want to know:
Specific to any country?