Australia is not Cyprus. Professor Ross Garnaut said as much during an interview with the ABC's Tony Jones this week (more on that later). Of course Australia is not a small country tied into an unpalatable and unfunctioning monetary union like a Mediterranean peripheral country. So why the headline.
Well Australia is tied strongly to China and... is very dependent on offshore financing. Since the GFC started in 2007 Ozzie banks were exposed for the relatively small deposit bases - something they have been remedying in recent years (though not without using this as an excuse to gouge depositors). This in itself is not particularly remarkable - the Aussie dollar and bond markets have swelled with surging inflows as worldwide investors have galloped in for healthy returns and interest rates in Australia's booming economy.
But therein lies the risk - should a sudden reversal of sentiment cause a 180 degree turn and a rush of money out of the country, how exposed will #Ozeconomy be? It's hard to say but one tweet by respected economist Stephen Koukoulas raised an eyebrow. Though justifying the current strong position there does seem to be a hint of possible future vulnerability for Australia:
All is fine for now but worth remembering that confidence is precious...
UPDATE - Bloomberg has an article indicating that foreign interest in Australian bonds is falling:
...Banks held A$76.2 billion ($79.5 billion) of securities issued by regional borrowing authorities, or 37 percent of the outstanding debt, at the end of 2012, according to data from the statistics bureau. That’s up from A$71 billion, or 35 percent, at the end of the third quarter. The share of foreigners’ holdings fell to 32 percent, the lowest level since June 30, 2009....(here)
Well Australia is tied strongly to China and... is very dependent on offshore financing. Since the GFC started in 2007 Ozzie banks were exposed for the relatively small deposit bases - something they have been remedying in recent years (though not without using this as an excuse to gouge depositors). This in itself is not particularly remarkable - the Aussie dollar and bond markets have swelled with surging inflows as worldwide investors have galloped in for healthy returns and interest rates in Australia's booming economy.
But therein lies the risk - should a sudden reversal of sentiment cause a 180 degree turn and a rush of money out of the country, how exposed will #Ozeconomy be? It's hard to say but one tweet by respected economist Stephen Koukoulas raised an eyebrow. Though justifying the current strong position there does seem to be a hint of possible future vulnerability for Australia:
All is fine for now but worth remembering that confidence is precious...
UPDATE - Bloomberg has an article indicating that foreign interest in Australian bonds is falling:
...Banks held A$76.2 billion ($79.5 billion) of securities issued by regional borrowing authorities, or 37 percent of the outstanding debt, at the end of 2012, according to data from the statistics bureau. That’s up from A$71 billion, or 35 percent, at the end of the third quarter. The share of foreigners’ holdings fell to 32 percent, the lowest level since June 30, 2009....(here)
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