Australian central bank urged to cut interest rates- Chinese GT Updates

Posted: September 26, 2011 in World Economy
Tags: , ,

Xinhua | September 26, 2011 14:19

The Australian federal Opposition and an economist on Monday urged the central bank to cut interest rates, given that the local economy is starting to slow, and some sectors are already in recession.

Financial markets slumped further in the past week because concerns over the stability of the euro-zone continue to escalate, and Opposition finance spokesman Andrew Robb was quoted by ABC Radio as saying that he expected further weakness in the world market, and Australia should respond by cutting interest rates.

“I think there is a case for the Reserve Bank of Australia (RBA) to now start to cut interest rates because the economy is already starting to tank in various areas,” he said on Monday. “Some of our sectors are technically in recession now. The government has got to recognize it and I think the Reserve Bank should recognize it.”

He claimed that Australia is highly vulnerable because the government spent too much in its stimulus response to the last global financial crisis.According to Dr. Shane Oliver, head of Investment Strategy and Chief Economist, AMP Capital Investors, the RBA should cut the cash interest rate by 25 basis points from 4.75 percent to 4.5 percent at its October meeting, because Australian home sales and retail spending were exhausted, and faced recessionary shrinkage.

“Interest rates have to come down or we risk getting into a downward spiral where falling confidence leads to reduced spending, which leads to higher unemployment. It’s now starting to happen,” he said in a statement, and warned that the RBA risked joining European governments in falling “behind the curve” by failing to act on deteriorating economic conditions.

However, federal Finance Minister Penny Wong rejected Robb’s comment that Australia economy is starting to tank, saying that Australia had already demonstrated it had the strength to survive turbulent times.

Wong maintained Australia was better placed than almost any other country in the world to deal with global economic problems.

The Reserve Bank of Australia, which last raised the interest rate to 4.75 percent in November last year, will hold a board member meeting on October 4.

ECB program length undecided

Global Times- September 25, 2011- By Agencies

The European Central Bank has not decided how long its unconventional interventions in the secondary market for European government debt will go on, Executive Board Member Jose Manuel Gonzalez-Paramo said Sunday.

The debt purchases were approved by an overwhelming majority at the ECB’s board and were not influenced by governments, Paramo said.

Reuters

Europe aiming to beef up its financial bailout fund

Global Times | September 25, 2011 23:22 – By Agencies

Europe is working to ramp up the firepower of its bailout fund, top officials said on Saturday, as the United States, China and other nations raised the alarm about its debt crisis hurting the world economy.

Financial markets plunged last week on fears that Greece’s near-bankruptcy could spread to other eurozone countries, heaping pressure on European policymakers to prevent a repeat of the chaos that swept the world in 2007-2009.

The European Union’s top economic official, Olli Rehn, said as soon as the region’s governments confirm new powers for their 440-billion-euro fund, known as the EFSF, attention will turn to how to get more impact from the existing money.

“We need to find a mechanism where we can turn one euro in the EFSF into five, but there is no decision on how we could do that yet,” another senior European official said.

The rescue fund would need to be at least 2 trillion euros to safeguard Italy and Spain if the crisis were to spread, financial analysts estimate.

The United States and other nations have urged Europe to leverage up the fund, possibly with support from the European Central Bank.

But officials from the ECB and from Germany remained wary of using the central bank, which has a strict mandate to pursue low inflation.

“We should not think of leveraging a public pot of funds as a free lunch,” said ECB Governing Council member Patrick Honohan.

The sovereign debt crisis threatens to throw the eurozone into recession and has placed a troubling drag on an already slow US economy. It could come to weigh on emerging economies too.

Reuters

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s