The weird economy of Australia

Discussion in 'Economics' started by jlryan87, Nov 8, 2011.

  1. jlryan87


    Hey fellow ET'ers. Something pop up in my mind today. I would like to see someone here showcasing your awesome understanding of economics.

    So Australia has a target cash rate of 4.5%, set by the Reserve Bank of Australia. That translates to a business lending rate of about 8%. When Australian companies as a collective borrows at 8%, in order to be able to repay the loan, it must produce return on capital investment of at least 8% to service the loan. But Australia only has a GDP growth rate of 1%. How can it produce so little yet able to service a loan repayment so big?

    [Update 1]
    Pardon my lack of research before asking this. I was just thinking out loud. I just found this article about Australia's unsustainable debt.’s-own-subprime-crisis/
    It's a bit dated. Everyone feel free to chime in with any additional info.
  2. Corporations can borrow in foreign markets. The banks regularly do this.
  3. and they dont like AUD low for obvious resons.
  4. And that's why Australia is probably already in a recession.
  5. in AU ~100K "THANK YOU for the contribution but we dont need you an more" notices will be or has been forked out around NY '12, yet EURAUD is at 25 year LOW at 1.28 !!!!

    some major pressures building up in the market.
  6. JamesJ


    GDP is in real terms, so nominal GDP growth might be more like 5%
  7. I am already so tired of my aussie friends saying 'we are immune'.

    ahh no.