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Aug 17, 2005

Consumer confidence and current account balance

The strong recovery of consumer confidence will cheer the retailers, who have experienced strong recent sales in any case. We also report the "Treasury line" that households rebuildin

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The strong recovery of consumer confidence will cheer the retailers,
who have experienced strong recent sales in any case. We also report
the “Treasury line” that households rebuilding battered balance sheets
will help to reduce Australia’s excessive current account balance
(CAD).

And another view more closely akin to Henry’s, from the ANU’s venerable
sage, Professor Ross Garnaut: “… Ross Garnaut told the inquiry that
the current deficit was unusual because it came at a time of booming
commodity prices and unusually low global interest rates.”

Professor Garnaut said a quick deterioration in terms of trade or a
rise in world interest rates could trigger a slump in the Australia
dollar, with serious economic consequences.

“In earlier periods when it has got to this level it has been followed
by severe adjustment problems,” Professor Garnaut said. “That doesn’t
prove it’s a problem now, but it should get us thinking.”

It seems we worriers are not alone. And there is more! BCA President, Hugh Morgan AC, said in yesterday’s AFR: “Complacency will cost Australians dearly.”

Read more here.

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