AUSTRALIAN DEBT CEILING – STORM IN TEACUP
It is starting to play out ala Obama style.
“PM Tony Abbott tries to pressure Opposition by threatening cancellation of Christmas break.” ~ Nine New Australia
All because Australia wants to raise their debt ceiling to AUD 500 billion ? Just about 2/3 higher.
Debt ceilings to me and most of the world now must go into trillions no ? Who cares if it is a billion sounding number ?
Another school of thought is that DEBT CEILINGS are OBSOLETE. Debt should always be a function of GDP (or deficits as a function of GDP) and numbers set in the past do not mean anything in the future where the Quadrillion is likely to rule, at the rate we are going.
Australia’s annual GDP is USD 1.52 trillion, the 12th highest in the world. Debt at AUD 500 bio (current USD 273 bio) should hardly raise any eyebrows which is why the entire market is not paying much attention to it except that Australian’s like a bit of excitement now and then.
Now, if we are talking Japan with USD 9.4 trillion of debt (and more coming) vs GDP of USD 5.9 trillion, that is more alarming.
So it may have escaped our notice that the Australian Senate rejected the 100 bio increase in their debt ceiling to AUD 500 bio a month ago. http://www.bloomberg.com/news/2013-11-14/australia-faces-debt-ceiling-stand-off-as-hockey-warns-of-cuts.html And there are warnings of a government shutdown on 12 Dec and now PM Abbott is threatening to cancel Christmas break which has led to the AUD bouncing off its lows today to target 0.91 cts against the USD. It strikes me that Christmas must be really important to them (tongue in cheek). http://www.abc.net.au/news/2013-12-03/abbott-threatens-to-keep-parliament-sitting-through-december/5131406
Or was it the RBA this morning ? Ooops, nearly forgot about them because I thought it was last month’s speech because it was an absolute non event. http://www.rba.gov.au/media-releases/2013/mr-13-25.html
AUD looks like a short term buy for now, debt ceiling or not, with no new reasons to sell after the RBA today and the ECB coming up. Medium term weakness should not be discounted as the RBA did say the currency is uncomfortably strong but it all depends on China.
“Goldman Sachs’s Weisberger said buying the H-share and selling copper futures may generate a combined return of 25 percent next year.”
AUDSGD at 1.14 is holding well and we could see 1.16 as a short term target on good news of a debt ceiling resolution before the 12th.
AUDMYR is trading at a 3 month low and could see 2.97 in the near term and by that, I mean, Christmas.