Saturday, September 24, 2011

G20 leaders try to calm financial markets; Europe signals is will bring forward US$700 rescue fund to stablise Italy and Spain

By Business editor Peter Ryan

It's been another volatile night on financial markets despite assurances from policy makers that plans are afoot to avert a new economic shock.

Stocks in Europe and the US rebounded after wild swings, but only after the European Union said it was fast tracking the setup of a permanent rescue fund.

But global investors remained unconvinced and the selloff in risk exposed commodites continues as money pours in to the perceived safe havens of the US dollar and US treasury bonds.

G20 leaders meeting in Washington said they would take "all steps necessary" to calm financial markets pledging "collective and bold action".

Here's my analysis broadcast on the ABC's "AM" program.

Friday, September 23, 2011

Reserve Bank points to uncertain future; unsure if current crisis will spark "serious market dislocation"

By Business editor Peter Ryan

The Reserve Bank has forecast an increasingly uncertain outlook for the global financial system while noting Australia is in a “relatively strong condition”.

In its latest Financial Stability Review, the RBA pointed to an escalation in sovereign debt sustainability in Europe and “severe market reactions” over the past six months.

The Review says Europe’s sovereign debt crisis, and a reassessment of growth prospects in the US and Europe have “helped trigger a period of heightened turbulence” which has raised risk aversion in funding markets.

Listen to my analysis broadcast on "The World Today".

Global markets plunge; investors fly from risk to greenback and US treasuries

Thursday, September 22, 2011

RBA's Battelino kills rate cut hopes; says Australia no longer catches cold when US sneezes

By Business editor Peter Ryan  - analysis

The deputy governor of the Reserve Bank has painted an upbeat picture of the Australian economy, signalling that interest rates are unlikely to be cut.

Speaking in New York overnight, Ric Battelino says Australia's fortunes are now largely tied to China and that any downturn in the US won't necessarily resound here.

Mr Battelino also cast doubt over the recent increase in Australia's jobless rate warning there was no firm evidence that labour market is weakening.

Here's my story on ABC News Online, and you can listen to the item broadcast on The World Today.

Wednesday, September 21, 2011

News Flash from IMF - global economy is in deep trouble; urges EU to "get its act together".

By Business editor Peter Ryan

The International Monetary Fund has urged Europe to "get its act together" and deal with the deepening sovereign debt crisis.

The IMF warned the US and Europe could slide back into recession and said the global economy has entered a "dangerous new phase".

The Fund's chief economist Olivier Blanchard said European leaders had been one step behind panicked financial markets, adding to criticisms that EU leaders have been divided in the face of a ticking debt bomb.

"We are very explicit in our messages, both in the EU and elsewhere, in saying that Europe must get its act together and it is absolutely essential that they do what's needed. It is indeed a major source of worry. So you can see us as indeed issuing a call to arms," Mr Blanchard told reporters in Washington.

Mr Blanchard singled out Europe as "a major source of worry"  as he released the IMF's latest World Economic Outlook report.


Tuesday, September 20, 2011

RBA "well positioned" to cut rates but rate cut seen unlikely

The Reserve Bank has signalled it is well-placed to cut interest rates if global economic conditions continue to deteriorate.

But in the minutes from its September meeting a fortnight ago, the central bank board says it is still determining how those pressures might help contain inflation.

Here's my take on the RBA minutes broadcast on The World Today.

The RBA is also concerned about the soft Australian economy and the continuing impact of the high Australian dollar on manufacturing and tourism.

However the minutes show the board is sceptical about market predictions for an interest rates cut, warning that a range of technical factors mean market pricing might not be accurate given the current circumstances.

The weakening chance of a rate cut by the end of the year pushed the Australian dollar as high as 102.58 US cent after the minutes were released.

Greek tragedy fast running out of chapters

It's been another shaky session on global financial markets, with time running out for Greece to avoid defaulting on its debt.

Stocks across Europe plunged around three percent on concerns the Greek government will fail to meet requirements for a fresh bailout.

As talks between EU leaders and the IMF lurch into farce, Greece is set to run out of money within weeks, which means public servants won't be paid and pensions will go on hold

Now the Greek government has promised as much austerity as possible to win the next installment of financial aid - but lenders are demanding great cuts to public spending and greater tax collection.

This is going to be a hard sell to Greek taxpayers who are already hurting, and there's a view that Greece is being made a scapegoat for bad EU policy decisions and the lack of decisive action on the sovereign debt crisis.

But despite this glimmer of hope, the stress getting worse and yields for Italian and Spanish bonds have risen above five percent on fears that those two powerhouse economies are at risk of contagian.

With the financial aid for Greece showing few signs of working, perhaps it's time for Greece to leave to EU to sort out its own problems.

The economist who predicted the GFC in the first place, Nouriel Roubini of Harvard University, says Greece should begin an orderly default without delay.

Professor Roubini says this will help Greence avoid a vicious cycle of insolvency, low competitiveness and the possibility of a depression.
 And he says a return to the Dracma currency will allow Greece to depreciate and restore growth, which helped Argentina after it defaulted a decade ago.