Would it be that bad afterall?
August 1st 2006 14:48
Just like the analysts' estimates of earnings, any earnings surprise of a company to the contrary would be a...surprise, hence the surprise reaction to the company's share price. So is anyone expecting a surprise on the rate hike decision? Well, so far, from the economist to the futures market, expectations of a rate hike is almost "confirmed" and its a matter of hours before the official annoucement by the RBA on Wednesday 2 August 2006 9.30 AM AEST. Even the most optimistic economists see no reason why the hike will not materialised, albeit being the last hike, and on the other side, another hike in December seems highly possible. However in economics and finance, always expect the unexpected.
Yes, the rate hike definately hurts but Australia is not alone, up north, China and Japan are increasing interest rates with the former trying to cool its overheated economy and economic activity is finally picking up for the latter. Don't forget about the EU rates as well. With the exception of US, most of the world major economies are experiencing rate hike as well, and it seems afterall, Australia isn't standing tall on rates, in terms of international economic perspective.
Oil price is still all time high but as China engage its economic brakes, the current oil supply could ease which could be translated to the easing of oil price. Seems simple but its possible. Japan being the world's second largest economy is finally seeing some light from its almost perpectual deflationary economy augurs well for the world although Japan is a net exporter. The inflationary steam is finally vaporising to thin air in the US is another major bonus as the consumer and housing markets could pick up further and being a net importer, the world benefits altogether again.
As you can see, the most lethal and quickest impact of the changing economic situation on Australia lies with its giant northern neighbour, China and its ever increasing demand for oil. Any slowdown in oil demand by the Chinese over the medium term, as its like to be so, could eventually trickle the benefits to the ordinary Aussies.
Afterall the most worrying issue for John Howard is the price of oil.
Yes, the rate hike definately hurts but Australia is not alone, up north, China and Japan are increasing interest rates with the former trying to cool its overheated economy and economic activity is finally picking up for the latter. Don't forget about the EU rates as well. With the exception of US, most of the world major economies are experiencing rate hike as well, and it seems afterall, Australia isn't standing tall on rates, in terms of international economic perspective.
Oil price is still all time high but as China engage its economic brakes, the current oil supply could ease which could be translated to the easing of oil price. Seems simple but its possible. Japan being the world's second largest economy is finally seeing some light from its almost perpectual deflationary economy augurs well for the world although Japan is a net exporter. The inflationary steam is finally vaporising to thin air in the US is another major bonus as the consumer and housing markets could pick up further and being a net importer, the world benefits altogether again.
As you can see, the most lethal and quickest impact of the changing economic situation on Australia lies with its giant northern neighbour, China and its ever increasing demand for oil. Any slowdown in oil demand by the Chinese over the medium term, as its like to be so, could eventually trickle the benefits to the ordinary Aussies.
Afterall the most worrying issue for John Howard is the price of oil.
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