With an economic meltdown on the verge of becoming a reality in Europe over the Greek, Spanish and Italian woes, Australia’s Shadow Treasurer, Mr Joe Hockey, believes that our country will weather the storm better than most.
According to Hockey, with the promise of further rate cuts, possibly as soon as tomorrow, a budget surplus, strong mineral exports and a lower than normal jobless rate, Australia is in a lot better shape than it’s western counterparts.
“Well look, Australia is in a better position than most other Western nations,” he said. “We have an unemployment rate of around 5 per cent, we have strong demand for our commodities and even though they probably won’t get there we have a Government that at least is promising to deliver a surplus budget. So whilst those factors are good, we, like everyone else are quite vulnerable to what’s happening in Europe.”
“And one of the reasons why we focus so much on the Reserve Bank’s movement of the cash rate is that most Australians have variable home loans and therefore any movement in the cash rate does flow through to the balance sheet of the every day household very quickly.”
“And that has an immediate impact on confidence of consumers. Many countries actually don’t have that transmission rate, and therefore central bank activity doesn’t have the same immediate impact that it does in Australia.”