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Date Published : Wednesday, January 23, 2008
As the world's stock markets rumble with discontent, many Australian consumers may wonder what all the fuss is about and whether any of it would affect them.
On Tuesday (January 22nd), stock markets across the globe - including those in London, New York and Hong Kong - fell dramatically amid fears of a recession hitting the influential US economy.
During that day, Australia's S&P/ASX 200 dropped by over seven per cent, wiping billions of dollars off of the values of the country's biggest companies.
According to Warwick Cumming, of Tyndall Investment Management in Sydney, "there's an element of panic".
However, what is there for consumers to panic about?
To start with, Australian banks borrow money from a number of banks around the world, including the US, to function. The cost of borrowing that money has increased due to instability in the markets and, as a result, interest rates on home loans have been increased over the last few weeks.
The current crisis may put the Reserve Bank of Australia's imminent move to increase interest rates on hold. The US equivalent - the Federal Reserve - has cut rates by 0.75 per cent in a bid to stabilise the markets.
Despite this, Australian treasurer Wayne Swan feels the nation is in good stead to survive the turmoil.
He said in a statement: "We are well placed to ride out the turbulence that flows from events in the US even though we are not immune from it."
Whether that is true or not, only time will tell. However, the old adage about the whole world catching a cold when the US sneezes is grounded in history. The turmoil in the markets will have an effect on everyone.
Australian savings accounts compared and reviewed.
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