Federal Treasurer Joe Hockey in danger of becoming a walking talking sovereign risk

The current national government debt ceiling is $300 billion and, on 13 November 2013 the House of Representatives passed the Commonwealth Inscribed Stock Amendment Bill 2013 increasing the Treasurer’s standing borrowing authority in the Commonwealth Inscribed Stock Act from $300 billion to $500 billion. Subsequently the Senate sent the bill back down with the amount amended to $400 billion.

It doesn’t take a genius to realize that Australia’s national debt is not going to grow beyond $400 billion before mid-2016, if the Abbott Government is as good a financial manager as it promised it would be.

At present government borrowings stand at an estimated $292 billion, with $22 billion of that being borrowed by the Abbott Government since 18 September 2013.

Since the Senate acted, Treasurer Joe Hockey has been publicly threatening a Tea Party-style hissy fit which would allow government services to stop and to bring about “massive cuts” if Labor does not support the Coalition's bill to raise the debt ceiling.

Mr. Hockey apparently finds nothing amiss in making threats which have the potential to damage Australia’s reputation.

If he keeps on in this manner foreign/domestic investors, business and consumers may react negatively.

If this happens Mr. Hockey will have become a walking sovereign risk and cost the economy many billions of dollars.

As the Business Spectator opined on 15 November:

The national interest, however, would be better served by Hockey getting out of campaign mode and into governing mode. Asking for more debt next year would be a minor political embarrassment (and let’s not forget that it most likely won’t be needed), but in the meantime we would look less that the scared kid of Asia hiding under the stairs. 

That Mr. Hockey’s ego-driven threats are hypocritical and a political ploy can be clearly seen when one looks back to May 2012, when the former Labor Government announced its intention to raise the debt ceiling from $250 billion to $300 billion the Coalition was not happy and attempted to block this increase:

If you do raise the debt ceiling, you have a rather large train rolling off the edge of a rather large cliff. [(Leader of the Nationals in the Senate and Member of the Opposition’s Shadow Ministry Barnaby Joyce, Financial Review, 14 May 2012]

Now they are saying they are living within their means but are also saying, 'Just in case, please give us an increase in the credit card limit to $300 billion.' It does not sound like a lot if you say it quickly but it is a hell of a lot of money that Australians have to repay. Enough is enough....

The government must appropriately reflect the significance of increasing the limit on the face value of stock and securities that can be on issue under the Treasurer's standard borrowing authority. The Treasurer must then make the case to the Australian people that Labor deserves the right to increase the credit card limit. The Treasurer must explain why he cannot use the Loan (Temporary Revenue Deficits) Act 1953. I asked him a question in this place. He could not answer it. So, to that effect, and I move the following second reading amendment:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House requests the Government to vary the resolution in relation to the Appropriation bills agreed by the House on 8 May 2012 to permit amendments to be moved and debated to Appropriation Bill (No. 2) 2012-13.”

This is the very least that the public deserves......

We will quiz the AOFM and the Department of the Treasury at estimates. We want to get to the bottom of exactly why this sneaky government is trying to avoid proper scrutiny on the debt limit. [Liberal MP and Shadow Treasurer Joe Hockey, Hansard, 21 May 2012]

Acting Prime Minister, does  the government view the increase in the nation's credit card limit from $250 billion to $300 billion as a very serious issue or no big

deal?...

This is a budget with the debt issue, this increase in debt from $250 billion to $300 billion debt ceiling.... [Liberal MP and Shadow Minister for Finance, Deregulation and Debt Reduction Andrew Robb, Hansard, 21 May 2013] 

Joe Hockey's current belligerence is also a far cry from his attitude just five days after the federal election when he told voters: You can go forward and spend your hearts out because we're going to have a good Christmas

* Photograph found at Google Images

Where is Australian Federal Treasurer Joe Hockey sourcing his financial advice?

By the end of October 2013 the Abbott Government was borrowing an est. $265 million per day and it continues to borrow at a frenetic pace. 

At the same time it is moving away from the budget measures outlined in its September 2013 costing table and has blown out the 2013 budget deficit by an estimated $10 billion.

ABC News 9 November 2013:

The Budget Monitor from Deloitte Access Economics..... has raised concerns about whether the Government will take unpopular decisions to improve the budget outcome and return to surplus within the promised 2016/17 timeframe.

The assessment has forecast a budget deficit of $39.7 billion for this financial year, almost $10 billion higher than the Pre-Election Fiscal Outlook (PEFO) predicted.

The PEFO estimated a deficit of $30 billion, but since then the new Coalition Government has scrapped some tax windfalls and handed $9 billion to the Reserve Bank.

Deloitte's Chris Richardson says those decisions have significantly contributed to the size of the deficit.

"That is a cost to the budget, it's all fallen this year. It's a lot of dollars," he said.

"You might eventually see those dollars head back to the Government but it is a really rotten budget deficit this year."

The myth that the Howard Government left absolutely no government debt when it departed

 

How the Federal Liberal Party would like you to see Australian Government Debt

 

http://www.liberal.org.au/latest-news/2013/03/27/labor-must-recognise-facts-about-australias-record-debt

 

How the rest of the world sees Australian Government Debt

 

Historical Australian Government Debt

 

 

 Australian Governments 1990 to 2013

 

 The Howard Government

 

 

No matter which way the bread is sliced the fact remains that the Howard Government went to the 2007 federal election with government debt on the books.

 

So why is the Australian National University aiding and abetting a mining company intent on destroying NSW Northern Rivers communities?

 

 

According to the Australian National University (ANU) in the ACT this is its financial situation:

 

ANU is unusual in Australia in that it has a large investment portfolio for the size of the University budget. Annual University revenue is $0.9B, while funds in investments total $1.1B. This investment portfolio serves a number of purposes:

• Provides revenue to support the ANU liability to current and former staff covered by the Commonwealth Superannuation Scheme (CSS) – approx. $450M
• Invests the funds within the Endowment for Excellence which funds some staff salaries, scholarships etc.
• Invests the cash reserves of the University, whether held centrally or by Colleges

National and international issues mean that investment returns have declined in recent years and the expectations are that markets may have now entered a period where investment returns may be below 5 per cent for an extended period. This decline in investment income will have a significant impact on the University budget. The 2012 budget indicates investment returns will be $30M less than in 2011. Within this, the total funds required to support CSS pensions will be $10M more than the return on the CSS investment sum. This is a shortfall which must be met from other University funding sources.

So how is this university tackling its falling investment income?

Well, it is apparently not doing what it implied to faculty, students, media and the general public in 2011 - totally divesting itself of coal seam gas industry shares.

Woroni, the ANU student newspaper:

Vice-Chancellor Ian Young has announced that ANU will sell its shares in Coal Seam Gas extractor Metgasco in light of opposition from students to university involvement with the industry.

 

The Canberra Times:

The ANU's vice-chancellor Professor Ian Young announced the sell-off of about $1million worth of Metgasco shares in a statement to the ANU Students Association this week. But he's played down the role of student protests in forcing the move, telling The Canberra Times it was ''a pragmatic decision'' based on the worth of the shares.
''We've had those shares since 2001,'' Professor Young said.
''They represent less than 0.1 per cent of our total investment portfolio.''

Because according to Metgasco's own documents as of 21 September 2012 ANU was the 17th largest shareholder in this coal seam gas exploration and production company with 2.5 million shares remaining of the 4.2  million shares it held in 2011.

The university's excuse in August last year for this state of affairs - “there are no/few buyers” for these shares. 

This excuse seems laboured. Even though share volume traded is often sluggish, by the end of September 2012 a good stockbroker should have been able to offload ANU's remaining shares.

It would appear that it is determined to retain its investment in Metgasco in spite of the fact that this mining company's first-stage plan for the Northern Rivers is to establish an estimated 1,000 gas production wells.

Turning the rural landscape into a version of this:

Section of a gas field in Tara, Queensland

 

ANU faculty, students and alumni need to confront the fact that they are enabling a mining company to proceed with its commercial objectives despite the fact that the affected Northern Rivers communities have clearly not granted it a social licence to do so.

This is the current membership of the University Council and I would suggest to Northern Rivers communities that these individuals need to justify the continuing inclusion of Metgasco Limited in the university's investment portfolio:

Professor the Honourable Gareth Evans AC QC - Chancellor

Professor Ian Robert Young AO - Vice-Chancellor

Ms Ilana Atlas - Pro-Chancellor  

Dr Doug McTaggart

Dr Vince FitzGerald

Ms Robin Hughes AO

Ms Martine Letts

Mr David Miles AM

Mr Graeme Samuel AC

Professor Andrew MacIntyre

Professor John Close

Professor Tim Senden

Mr Matthew King

Ms Aleksandra Sladojevic

Ms Julie Melrose

 

Their contact details are here.

* An email was sent to the Australian National University Chancellor seeking further confirmation of the Metgasco share parcel. No reply has been received.

In which Standard & Poors, ABN Amro and Local Government Financial Services Pty Ltd are found liable for Australian local government financial losses

 

Excerpts from Justice Jayne Jagot's reasons for judgment in the matter of Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 (5 November 2012):

 

12.5.3.7 IMPACT OF THE GLOBAL FINANCIAL CRISIS

1. For the reasons already given I do not accept that the GFC was the real, essential or effective cause of the loss or damage incurred by the councils…..

16. CONCLUSIONS

1. For the reasons given in the preceding sections I am satisfied that:

(a) the councils' claims for rescission of the agreements by which they purchased the Rembrandt 2006-3 CPDO notes from LGFS and restitution (both under statute and otherwise) should not be accepted;

(b) leaving aside some aspects of their claims immaterial to their overall entitlement to damages, the councils are each entitled to succeed in their various claims for damages against LGFS, S&P and ABN Amro;

(c) the claims of LGFS, S&P and ABN Amro against the councils for contributory negligence and being largely responsible for their own loss, with the consequence that the damages payable to each council must be reduced, should not be accepted;

(d) the councils have each proved that they suffered loss and damage as required to sustain their claims against LGFS, S&P and ABN Amro, the damage being the amount each paid for the Rembrandt 2006-3 CPDO notes less the amount they received on the cash-out of those notes. No deduction for coupon payments received by the councils should be made;

(e) this is also the proper measure of damages payable to Cooma and Corowa in respect of their breach of contract claims against LGFS;

(f) other than in respect of their claims for equitable compensation from LGFS for breach of fiduciary duty, the councils' damages claims against LGFS, S&P and ABN Amro attract the various proportionate liability provisions and liability for the councils' damages should be apportioned as between LGFS, S&P and ABN Amro as to 33⅓% each;

(g) the councils' claims for equitable compensation from LGFS for breach of fiduciary duty should also be sustained. While this compensation is not apportionable the measure of compensation is the same as the councils' damages claims;

(h) there is an outstanding issue as to the interest which the councils should receive, ABN Amro having argued that pre-judgment and perhaps post-judgment interest should not exceed the interest which would have been payable had the Rembrandt 2006-3 notes not cashed out and the other parties not having addressed that argument;

(i) LGFS is entitled to succeed in its various claims against ABN Amro and S&P including:

(i) proportionate liability of S&P and ABN Amro in terms of the councils' claims against LGFS (see above);

(ii) liability of S&P and ABN Amro to LGFS for damages in respect of the Rembrandt 2006-3 CPDO notes that LGFS purchased and did not sell to councils but sold instead to its parent company, LGSS, after S&P downgraded the rating of those notes from AAA to BBB+; and

(iii) liability of S&P and ABN Amro to make equitable contribution to LGFS in respect of LGFS's settlement of the StateCover claims against LGFS, S&P and ABN Amro relating to StateCover's purchase of the Rembrandt 2006-2 CPDO notes.

(j) the claims of S&P and ABN Amro against LGFS for contributory negligence and being largely responsible for its own loss in respect of the Rembrandt 2006-3 CPDO notes that LGFS purchased and did not sell to councils, with the consequence that the damages payable to LGFS on that account must be reduced, should not be accepted;

(k) LGFS has proved that it suffered loss and damage as required to sustain its claims against S&P and ABN Amro in respect of the Rembrandt 2006-3 CPDO notes it did not sell to councils, the damage being the amount LGFS paid for the Rembrandt 2006-3 CPDO notes less the amount LGFS received on the sale to its parent company. Again, no deduction for coupon payments received by LGFS should be made;

(l) LGFS's damages claims against S&P and ABN Amro attract the various proportionate liability provisions and liability for LGFS's damages should be apportioned as between S&P and ABN Amro as to 50% each;

(m) the issue of interest referred to above applies equally to LGFS;

(n) LGFS's claims against S&P and ABN Amro for damages or equitable contribution against S&P and ABN Amro in respect of LGFS's settlement of the StateCover proceedings should be accepted, with LGFS, S&P and ABN Amro each to contribute 33⅓% to the overall settlement sum including LGFS's costs of the proceedings;

(o) the cross-claims of S&P and ABN Amro against each other should be rejected;

(p) LGFS's claims against AHAC for indemnity under the contract of insurance should be accepted and AHAC's cross-claim against LGFS for reimbursement of defence costs already paid should be rejected; and

(q) costs, along with the outstanding issue of interest, may be argued.

 

3723.   Directions will be made for the parties to confer about a timetable for the making of any further submissions on interest and costs, as well as the making of final orders in accordance with these reasons for judgment.
 

On 24 May 2012 the Australian Securities and Investment Commission revoked Local Government Financial Services Pty Ltd's Australian Financial Services license.

 

It has been reported that Standard & Poors intends to appeal the 5 November Federal Court judgment.

Commonwealth Budget Papers 2012-13

Over at www.budget.gov.au the 2012-13 federal budget papers are available for those interested in delving deeper than tomorrow's tabloid newspaper headlines.

• Budget Speech
• Budget at a Glance
• Budget Overview
• Budget Paper No.1  Strategy and Outlook
• Budget Paper No.2  Budget Measures
• Budget Paper No.3  Australia's Federal Relations
• Budget Paper No.4  Agency Resources
• Appropriation Bills

• Mid-Year Economic and Fiscal Outlook
• Final Budget Outcome

• Portfolio Budget Statements
• Portfolio Additional Estimates Statements
• Portfolio Supplementary Additional Estimates Statements

• Ministerial Statements

Past Budgets

The Abbott-Hockey Economic Theory of Small Government

With so many conflicting explanations of how a Tony Abbott-led federal government (with Joe Hockey as Treasurer) would manage Australia's economy, I went in search of the theoretical basis of various Coalition claims about small government, lower taxes, budget costings and wandering surpluses.

This is where I think it all starts for these maestros of mathematics.................

(a + b) (a - b) = a² - b²  + 1

Graphic from io9.com

Uncle Joe puckers up and blows the first dog whistle of the season

On the 3^rd January 2012 @JoeHockey tweeted that “I warned of this a year ago!!!”

I clicked on the link wondering what financial horror the federal shadow treasurer had uncovered.

The article merely confirmed the bleeding obvious; “Among banks trading in Australia, the major lenders account for 86.7 per cent of the home loan market.
Well, knock me down with a roo’s tail feather!

Now mortgage holders can switch between banks with no financial penalty for doing so, they are still sticking with the big banks.

I wonder why?

Could it possibly be that these aspirational borrowers believe that solid reputations built up over decades or centuries by the banks really matter in periods of global financial uncertainty?

Or did many of them approve of the big banks following the November 2011 example of the Reserve Bank rate cut? After all there was a surge in mortgage lending to first home buyers and investors right after that – mostly within the banking sector.

Were they cheered by the fact that in December all four of the big banks had passed on another rate cut to their borrowers?

Now Uncle Joe likes to blow his dog whistle loudly over Twitter, this time crying out that Teh Big Four are still big!
A few street mutts might even scamper his way. This old mongrel won't be one of them.
I may hail from a long gone time where you actually knew your bank manager and it was the price of our schooners which concerned us all, but for the life of me I can’t see that consumers exercising choice is a problem for the country. Specially those consumers taking out a new mortgage.

Why should they go and pay higher borrowing rates in the non-banking sector just to please Hockey’s notion of how the world should turn?

Running dogs from http://www.halhigdon.com/
Dog cartoon from http://www.webweaver.nu/

Overall Australians are going into the 2011 festive season still confident that the economy and home finances are faring well

From the last Essential Report for 2011:

Click on graphs to enlarge

Overall, respondents were optimistic that 2012 would be a good year for themselves overall (52%) and their workplace (45%). They tended to be less optimistic about their financial situation (33% good/27% bad) and somewhat pessimistic about the Australian economy (29%/35%).
Compared to expectations 12 months ago, respondents were much less optimistic about the Australian economy (48% good last year compared to 29% good this year) and also rather less optimistic about their own financial situation (39%/20% last year compared to 33%/27% this year).
When compared with last week’s questions on perceptions of 2011, these figures suggest that respondents expect 2012 to be better than 2011 for themselves and their family (net +36% for next year compared to net +24% for this year), a little better for their workplace (+25% next year, +20% last year) and their own financial situation (+6% next year, -2% this year). The Australian economy is expected to be a little worse in 2012 (-6% next year compared to +2% last year).

UPDATE:

Moody’s Investor Service Global Credit Research - 21 Dec 2011

New York, December 21, 2011 -- Moody's maintains the following ratings on Australia, Government of:

Long Term Issuer (domestic and foreign currency) ratings of Aaa

Senior Unsecured (domestic and foreign currency) ratings of Aaa

Senior Unsecured Shelf (foreign currency) rating of (P)Aaa

RATINGS RATIONALE

Australia's Aaa ratings are based on the country's very high economic resiliency, very high government financial strength, and very low susceptibility to event risk. Economic resiliency is demonstrated by the country's very high per capita income, large size, and economic diversity. As one of the world's most advanced economies, the country has not only a significant natural resource sector--including minerals,hydrocarbons, and agriculture--but also well developed manufacturing and service sectors. It also demonstrates strong governance indicators. In particular, the framework for fiscal policy is transparent and has, until now, consistently kept government debt at low levels.

The government's debt rating of Aaa takes into account the aim of maintaining a balanced budget, on average, over the business cycle. It is supported by the very low level of public debt and the country's strong financial system. In comparison to most other Aaa-rated countries, Australia's government financial strength is very high, with very low gross debt that is easily affordable and provides a high degree of fiscal flexibility...... [my bolding]

Hatip to Latika Bourke for tweeting this information.

Now before you indulge in très grande panic with Dr. No - actually look at the 2011-12 MYEFO

Don't rely on the spin - knock yourself out with a bit of 29th November number crunching!

"The Mid‑Year Economic and Fiscal Outlook 2011‑12 (MYEFO) has been prepared in accordance with the Charter of Budget Honesty Act 1998. The Charter requires that the Government provide a mid‑year budget report which provides updated information to allow the assessment of the Government's fiscal performance against its fiscal strategy."

Mid-year Economic and Fiscal Outlook 2011‑12 1.7 MB

Preliminaries and Foreword 205 KB

Part 1: Overview 147 KB

Part 2: Economic outlook 221 KB

Part 3: Fiscal strategy and outlook 254 KB
Attachment A: Sensitivity of budget estimates to economic developments 122 KB
Attachment B: Tax expenditures 100 KB
Attachment C: Supplementary expenses table and the Contingency Reserve 119 KB
Attachment D: Australia's Federal Relations 406 KB

Appendix A: Policy decisions taken since the 2011‑12 Budget
Revenue Measures  293 KB

Expense Measures 566 KB
Capital Measures 163 KB
Appendix B: Australian Government budget financial statements 296 KB
Appendix C: Statement of risks 218 KB
Appendix D: Historical Australian Government data 182 KB

Now this is something you won't hear Tony Abbott be man enough to admit

http://youtu.be/dme0nyz0OgU

O'Farrell Government to rob 68,000 NSW pensioners of millions every year

In 2009 the Rudd Labor Government increased the base rate of Australian pensions.

Since then those NSW pensioners renting social housing (who comprised less than 5 per cent of all public/community housing tenants in the state in 2010) have been fighting a rapacious state government which immediately saw this increase as a jam pot which it could dip into in order to improve its fiscal bottom line.

It would do this by taking 25% of the payment increase from the approximately 68,000 pensioners in NSW public housing, nearly one-third of whom are probably 65 years of age or older.

The windfall would come to an estimated $13.2 to $16.5 million annually for the NSW Government – depending on how many lone person households there are in this group.

In September 2011 the O’Farrell Coalition Government announced in the budget papers that it intends to commence stealing these millions from elderly, disabled and widowed pensioners.

NSW Nationals MPs who dominate North Coast electorates are remarkably silent concerning this theft. Why should they care - after all they are sitting quite comfortably on a salary package of over $140,000 per year plus an electoral allowance.

What a difference having a genuine national fiscal policy makes

The Economist’s Global Public Debt Clock 2011
Click on image to enlarge

Now before we all give into any international media-inspired hysteria and cry the sky is falling, here is Australia’s sovereign credit rating according to Standard and Poor’s (S&P) as of 5 August 2011:

Commonwealth of Australia

Sovereign local currency ratings (LT/Outlook/ST)  
AAA/Stable/A-1+

Sovereign foreign currency ratings (LT/Outlook/ST)
AAA/Stable/A-1+

Transfer and convertibility assessment  
AAA

The Commonwealth of Australia has retained an excellent Triple A credit rating from Standard and Poor's (as well as from Moody’s and Fitch) for the last eight years - for which successive federal governments of different political persuasions can take credit.

In 2011 its public debt as a percentage of its Gross Domestic Product (GDP) is running in the vicinity of 23 per cent, the current account deficit is around 2.5 per cent of GDP and total combined public, corporate and private individual foreign debt only resulted in a 3.9 per cent net income deficit as a percentage of GDP in the March 2011 Quarter - according to the figures I can find.


Just as importantly, one of the nation's major Asian trading partners China continues to see Australia as "stable" and gives a domestic currency credit rating of AAA and a foreign currency credit rating of AA+ at a time when Dangong Global Credit Rating has downgraded 
America's rating to "negative" and the official Xinhua news agency is stating; China, the largest creditor of the world's sole superpower, has every right now to demand the United States to address its structural debt problems and ensure the safety of China's dollar assets.

Now compare that brief fiscal thumbnail with the recent credit rating history for the USA, courtesy of a Democrat Government incapable of dominating the Congress and a Republican Party which has lost its way.

Standard and Poor’s release on 18 April 2011:

We have affirmed our 'AAA/A-1+' sovereign credit ratings on the United States of America.

The economy of the U.S. is flexible and highly diversified, the country's effective monetary policies have supported output growth while containing inflationary pressures, and a consistent global preference for the U.S. dollar over all other currencies gives the country unique external liquidity.

Because the U.S. has, relative to its 'AAA' peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revised our outlook on the long-term rating to negative from stable.

We believe there is a material risk that U.S. policymakers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013; if an agreement is not reached and meaningful implementation is not begun by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer 'AAA' sovereigns.

Standard and Poor’s release on 5 August 2011:

We have lowered our long-term sovereign credit rating on the United States of America to 'AA+' from 'AAA' and affirmed the 'A-1+' short-term rating.

We have also removed both the short- and long-term ratings from CreditWatch negative.

The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics.

More broadly, the downgrade reflects our view that the effectiveness, stability, and predictability of American policy making and political institutions have weakened at a time of ongoing fiscal and economic challenges to a degree more than we envisioned when we assigned a negative outlook to the rating on April 18, 2011.

Since then, we have changed our view of the difficulties in bridging the gulf between the political parties over fiscal policy, which makes us pessimistic about the capacity of Congress and the Administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government's debt dynamics any time soon.

The outlook on the long-term rating is negative. We could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case….

We have taken the ratings off CreditWatch because the Aug. 2 passage of the Budget Control Act Amendment of 2011 has removed any perceived immediate threat of payment default posed by delays to raising the government's debt ceiling. In addition, we believe that the act provides sufficient clarity to allow us to evaluate the likely course of U.S. fiscal policy for the next few years.....

United States of America

Sovereign local currency ratings (LT/Outlook/ST)  
AA+/Negative/A-1+

Sovereign foreign currency ratings (LT/Outlook/ST)
AA+/Negative/A-1+

Transfer and convertibility assessment  

AAA


According to The Australian on 5 August 2011; Australian 3-year government bond prices posted their biggest one-day rise since 1991 as investors rushed en masse to the safety of risk-free assets.

In addition, The graph below shows historical exchange rates between the Australian Dollar (AUD) and the US Dollar (USD) between 7/7/2011 and 8/5/2011 as the international financial markets began to panic:

At 12pm (AEST) 6 August 2011 the Australian dollar was trading at 104.91 US cents....down from $US1.0665 late yesterday and off a 30-year high of $US1.1080 last week.  By 8 August the dollar was at 1.0343 US. 

On 5 August 2011 NASDAQ placed this recently high currency rate into perspective with this statement; the latest ascent comes about three months after the Australian dollar last hit a 30-year high. The initial push higher that started in June of 2010 came as a continuing mining boom and a series of interest rate hikes from Australia's central bank that began in October 2009 lifted the currency more than 30% against the U.S. dollar in a year.

According to the Herald-Sun the Australian stock market fell by 4 per cent on 5 August and at close of business yesterday the ASX All Ords and S&P/ASX200 graphs were not catastophic:

Placing that fall within an historical context is this ASX All Ordinaries (XAO) Index chart 1988 - 2011 graph:

Even the International Monetary Fund doesn't consider the Australian economy an overtly risky proposition. So the next time either the Opposition Shadow Treasurer Joe Hockey, unidentified Liberal/National sources or elements in the Murdoch press  attempt to slyly suggest that Australia's economy is inevitably on the way to the poor house without drastic regime change - yawn loudly and turn aside.

The only thing Australia has to fear at this point in time is the contagion of fear itself and perhaps being overly irritated by the silly political point scoring of conservative politicians and big business lobbyists alike.