High Rates, Global Market Turmoil Hurts Australia's Business

A report on business operations released on Tuesday showed that Australia's business conditions have slumped to the lowest level since the terrorist attacks on Sept. 11, 2001, and suggests domestic economic growth will go slow markedly.

The latest quarterly business summary from the National Australia Bank (NAB) said that global financial market volatility and 12-year-high interest rates are hampering business operations and slowing down the economy, and there appears to be no immediate relief in sight.

Federal Treasurer Wayne Swan said in a statement on the same day that recent events showed that the nation is not immune from global developments, but does have a strong, well-regulated banking sector that is "well-placed to withstand the fallout.

While most of the expected losses on U.S. sub-prime mortgage exposures now appear to have been taken, the IMF notes with concern the financial market effects of ongoing weakness in the U. S. housing market, and the U.S. economy more generally, Swan said.

The Australian economy and financial sectors are better placed than most other countries to withstand the current global economic turmoil, he added.

The business summary predicted that the National Accounts for the June quarter - due to be released in September - will show domestic demand growth slowing to between two and 2.5 percent, the slowest pace since late 2001.

Source: American Shipper