Imports, Credit Card Debt Soar
Sydney Morning Herald
Friday April 20, 2007
CHINESE whispers about Japanese interest rates fuelled trading in money markets, while in the local economy strong capital investment and consumer demand saw imports surge and credit card debt reach a 20-year high yesterday.
The dollar was tossed about between a low of just under US83.20c and a 17-year high just under US84c as speculation swept through currency markets that the Bank of Japan may raise interest rates."Rumours were circulating in London of an interest rate rise in Japan," a senior economist at National Australia Bank, David de Garis, said. "This saw the dollar fall against the yen, but it soon pushed back up again. However, the rumours are still permeating out there and have been sufficient to wind the dollar back."The dollar closed at US83.12c yesterday. It has been propelled higher in recent months by carry trades - where investors borrow in a low-yield currency, like the yen, to invest in a high-yield currency, like the dollar. The strong dollar helped goods imports to increase by 1 per cent last month, according to figures released yesterday by the Australian Bureau of Statistics. Most categories of imports rose for the month, with mineral fuels, machinery and transport equipment, and manufacturing goods recording the largest increases.ANZ economist Alex Joiner said the increase in imports was driven by the resurgence in global oil prices as well as an appreciating dollar.And the Reserve Bank has given the economy a vote of confidence, with a bulletin released yesterday suggesting there is no end in sight to the recent minerals boom. High prices for metals and other resources - which have risen at roughly 150 per cent over the past five years - could last for some time yet, the Reserve Bank bulletin said. While the price increases have been "by far the largest of the last century", the strong demand from China and other emerging economies could continue for several decades. Meanwhile, consumers have responded to last year's interest rate increases by leaning heavily on credit card debt. Card holders used almost 40 per cent of available credit limits in February, the highest result in over 20 years, Reserve Bank figures revealed.The average credit card balance was just below $3000 in February, also a 20-year high. Further interest rate rises would create painful choices in the future as people would have to wind back their lifestyles, CommSec chief equities economist Craig James said."In a way people are trying to delay the inevitable," Mr James said. "They know they have access to credit and are not wanting to cut into their spending and lifestyle."
© 2007 Sydney Morning Herald