President Barack Obama has been returned to office for another 4 years term.
The focus is now on a series of tax rises and spending cuts which according to leading independent forecaster in Washington would plunge US back into recession.
BlackRock Investment Institute reported that a second term for Barack Obama could result in the US falling off the fiscal cliff with broken limbs.
Click the link below to read BlackRock Investment Institute report.
So how does Australia compare to the US?
According to one Australian sharemarket commentator suggested that Wall St’s issues are US specific. He said…
I want to stress that Wall St’s issues are extremely US specific. Potential changes to US income tax rates shouldn’t have any dramatic effect on Australian equities and it was good to see a mature response from Australian equities yesterday and hopefully again today as large bank dividends are reinvested. I believe the case for relative and absolute outperformance of Australian equities vs. US equities is compelling, particularly considering our multi-year underperformance….
(Note: His article is not available for public reading)
Dr. Shane Oliver's recent report would give a fair insight of Australia standing in this fiscal environment. Key points of his report are:
- Australia has a low level of total debt compared to other major countries. But while public and corporate debt is low, one area of greater vulnerability is household debt.
- A chronic current account deficit in Australia also means a degree of vulnerability to foreign investor sentiment – although this has been the case for decades.
- While Australia is not without debts risk, it is still relatively low, in part due to the flexibility to cut interest rates further, the buffer the $A provides during extreme shocks, pent up demand in the non-mining parts of the economy and the likelihood of a hard landing in China.
Click link below to read Dr. Shane Oliver report.
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