In The Press   PAGE 3

Page 1 | Page 2 | Page 3 | Page 4 | View All

US Federal Reserve Chairman ‘uncertain’ about US economy

July 21st, 2010

The Chairman of the US Federal Reserve (the equivalent of Australia’s Reserve Bank), Ben Bernanke, has warned that the outlook for US economic conditions is ‘unusually uncertain’. In his testimony before the US Senate Banking Committee, Bernanke commented on the continued need for low interest rates to facilitate increased spending by businesses and households in the US. US Interest rates have been held at between 0 per cent and 0.25 per cent since late 2008. Over the past year, many economic commentators have voiced concern that a premature departure from economic stimulus by the Federal Government may lead the US to re-enter recession. The US economy grew at an annualised rate of 2.7 per cent for the first quarter of 2010, marking its departure from recession in 2009. However, persistently high national unemployment and sluggishness in the US manufacturing sector have led many to believe that a ‘double-dip’ recession may be occurring.

Australian economy continues to perform strongly

July 21st, 2010

According to a leading index of economic activity administered by the Westpac-Melbourne Institute, Australia’s annualised economic growth rate during May was 6.7 per cent – significantly higher than Australia’s long-term trend of around 3.0 per cent. Westpac estimates that annualised growth will be 3.5 per cent for the second half of 2010. However, brisk economic recovery in Australia is threatening to put upward pressure on interest rates. If inflationary pressures re-emerge due to strong domestic demand, the Reserve Bank is likely to increase interest rates during its next meeting in August. Westpac forecasts that underlying inflation will be towards the upper range of the Reserve Bank’s 2 – 3 per cent target band.

Obama Administration signs into law new financial market reform regulations

July 22nd, 2010

US President Barack Obama has signed into law a dramatic overhaul of regulations for the US banking and financial sector, claiming that the new provisions will help prevent the conditions that led to the global financial crisis of 2008. As part of the legislation, the US government possesses new powers to wind down companies that threaten the stability of the financial system, provides for greater transparency of hedge funds and derivatives markets, and creates a new Federal agency to protect consumers during financial transactions. In particular, the legislation is aimed at preventing the use of taxpayer funded ‘bail-outs’ for troubled banks and financial institutions in the future: a controversial and much-criticised emergency measure that was used around the world to promote stability after the 2008 crisis. The reform also provides scope for the Obama administration to set new capital and liquidity requirements for banks to ensure that they are more capable of weathering financial distress without resorting to government assistance.

South Korea, China and Japan Explore Free Trade Possibilities:

May 22, 2010

Trade ministers from China, South Korea and Japan met in Seoul to explore different options for promoting freer trade between the three countries. Japan is Asia’s largest economy, with China a close 2nd. Together, the three countries represent 18.6 per cent of the global economy. The trade ministers have agreed to begin a study aimed at evaluating the potential benefits of a free trade agreement. The study is targeted for completion by 2012. However, complications will certainly arise – already, South Korea and Japan have struggled to reach a bilateral trade agreement due to disagreement of rice exports.

Obama Administration Pursues Financial Reform:

May 22, 2010

The US Senate has approved legislation to impose new regulations on US banks and financial institutions. The legislation, which must be reconciled with a similar bill in the US House of Representatives before it can be made law, introduces new measures for the Federal Government to supervise financial institutions; places limits on the size of banks and the sorts of risks they can take under the ‘Volcker’ rule; sets up a new consumer protection agency to prevent predatory mortgage and credit card lending; and allows the Federal Government new powers to ‘wind down’ troubled financial institutions so that they have no impact on the wider economy. US President Barack Obama has suggested that passage of this bill will prevent any future taxpayer-funded bailouts of financial institutions.

Greece to receive first installment of bail-out funds

May 22, 2010

Greece is due to receive its first installment of a massive 110-billion euro bailout package arranged by the European Union (EU) and International Monetary Fund (IMF). For the first installment, 20 billion euros will be transferred to Greece. Of this, 14.5 billion euros are from EU member states and the remaining 5.5 billion euros have come from the IMF. The uncertainty regarding whether the bailout package would be agreed upon has prompted the euro’s value to slide against the US dollar. However, in return for the international community’s financial assistance, Greece’s government was pressured to make certain ‘austerity cuts’ – such as freezing public sector wages in an effort to return Greece’s budget deficit to surplus. Many of these austerity cuts have prompted violent reactions from Greece’s citizens, which has led to protests and riots on the streets in which several people have lost their lives. Spain and Portugal have also experienced similar financial difficulties in recent times.

Japan’s economy experiences more economic growth

May 21, 2010

According to the US Federal Reserve, the US economy is improving more rapidly than earlier expected, with predictions of higher growth and lower unemployment in the Federal Reserve’s minutes from its April meeting. The Federal Reserve predicted that the US economy would grow by between 3.2 and 3.7 per cent, up from the bank’s earlier estimates as low as 2.8 per cent. Additionally, the minutes suggest that the deterioration of the US labour market is finally ending and that unemployment could fall to as low as 9.1 per cent by year’s end. Nevertheless, the minutes also suggest that the financial situation in the US remains precarious due to continued uncertainty in Europe, and the impact it has had on stock prices and exchange rates throughout the world.

US Economy Continues to Bounce Back

May 20, 2010

According to the US Federal Reserve, the US economy is improving more rapidly than earlier expected, with predictions of higher growth and lower unemployment in the Federal Reserve’s minutes from its April meeting. The Federal Reserve predicted that the US economy would grow by between 3.2 and 3.7 per cent, up from the bank’s earlier estimates as low as 2.8 per cent. Additionally, the minutes suggest that the deterioration of the US labour market is finally ending and that unemployment could fall to as low as 9.1 per cent by year’s end. Nevertheless, the minutes also suggest that the financial situation in the US remains precarious due to continued uncertainty in Europe, and the impact it has had on stock prices and exchange rates throughout the world.

Economy to increase growth rate to 4 per cent

May 11, 2010

According to the new 2010-11 Commonwealth Budget, the Australian economy is expected to grow by 3.25 per cent in the next year, lifting to 4 per cent in 2011-12 before moderating slightly. Notably, Treasury’s predictions are slightly weaker than those of the Reserve Bank, which predict a higher rate of 3.75 per cent growth in the next year. Significant commodity exports to large, industrialising nations like China and India are expected to increase Australia’s terms of trade by 25 per cent in mid-2010, injecting $30 billion into the domestic economy. Treasury also predicted that inflation would remain relatively soft, with the Consumer Price Index (CPI) remaining steady at 2.5 per cent over the next four years. Finally, unemployment is forecast to drop to 5 per cent this year, before decreasing even further to historic lows of 4.75 per cent.

IMF confirms financial support for Greece

April 25, 2010

The International Monetary Fund (IMF) has confirmed that it will provide an aid package, if necessary, to assist Greece in its battle to sustain its crippled economy. Greece has requested an aid package from the European Union (EU) and the IMF totaling around $60 billion to help Greece service its international debt obligations – if not, Greece is at risk of defaulting on its debts, prompting widespread capital flight from Greece and the possibility of more financial problems. However, some in Greece have voiced concern over whether the IMF should be consulted for assistance, given the counterproductive impact IMF policies had during the Asian Financial Crisis of the 1997. However, IMF chief Dominique Strauss-Kahn has sought to assuage such concerns by confirming that the IMF has learnt from its past mistakes and will not repeat them. Concerns over whether a comprehensive assistance package will be adequately implemented have rattled investors all over the world, since a Greek default on its debts could hurt investors globally.

Page 1 | Page 2 | Page 3 | Page 4 | View All