Friday, April 24, 2009
Australia’s authorities seem to be so intent on intoning the mantra that Australia-is-in-better-sha
IMF forecasts and an admission from the Finance Minister that we are heading for government debt greater than $200 billion raises an obvious question: what on earth is the cash rate doing at 3 per cent?
As a result the Australian dollar will fall. At 70 US cents it looks fundamentally overvalued. International investors will not buy Australian government debt at a yield of 4.7 per cent and an exchange rate of 70c/70¥, when debt levels are at the point where a negative rating watch is likely, if not an actual downgrading.