IMF OFFICIAL: “So the situation is evolving. And that leads me to the next question also. We are always happy to revisit whether we can do things differently and should have done things differently.
I can assure you that we learn as we go along and evolving circumstances and whatever experience we have will be embodied in any new discussions that we have. And this is of course one of the reasons why we say this requires difficult decisions on both sides”.
So this institution that lends money to countries learns as they go along. That’s comforting (not). So what will happen to Australia in the future given that China’s economy has slowed considerably? Interest rates are at their lowest ever. The s&p/asx200 is dropping rapidly from around 5900 at the end of April to below 5300 as of August 21st. It has dropped from 5700 to 5300 in the 3 weeks so far of August. Looking at BHP shares we can see they have a share value of $24.38. That is lower than the price after the 2008 crash. Fortescue metals (FMG) are at levels about equal to the 2008 crash.
Australia’s debt on issue, that is government securities, are increasing from around $412 billion to around $518 billion over 4 years. Our currency has dropped by about 22% in a year against the US dollar.
The IMF’s latest 2015 article IV mission suggests that Australia has enjoyed growth over the last 20 years faster than its peers. The article also suggests that monetary policy has lost some effectiveness, but keep using it anyway, and that Australia would benefit from debt financed infrastructure investment. So the IMF suggests taking on more debt to help the country’s economy. Ah well, I suppose they are learning as they go. After reading article IV it seems to me that our politicians don’t have much say in running our country as the IMF’s suggestions coincide with policy direction. Please have a read of the article IV mission statement. Are we heading down the same path as Greece if we keep borrowing from the same creditors?