Effects Of U.S. Economy Could Sway Australia’s ETFs

Australia’s Prime Minister, Kevin Rudd, has stood up to stress the strength of his country’s financial system which could, in turn, benefit exchange traded funds (ETFs) that track indexes based Down Under.

Reserve Bank Governor Glenn Stevens noted that while our own banks are struggling, Australia’s banks continue to weather the storm, reports Paul Kelly for the Australian.

However, the country is facing a challenge ahead in the next few months, with local banks less likely to pass on any cuts to official interest rates, says the Canberra Times. If volatility continues in the United States, it’s likely the pressure will mount on the Reserve Bank of Australia to cut its rate when it meets next Tuesday.

The Achilles’ Heel of the Australian economy is the current account deficit. Australia has the world’s fourth largest current account in dollar terms after the United States, Spain and Britain. Moreover, Rudd must reduce expectations for handouts within Aussie society for both banks and business.

ETFs that will not go “down under”:

• iShares MSCI Australia Index (EWA), down 28.8% year-to-date
• NETS S&P/ASX200 Index (AUS), down 26.2% since April 10 inception

Subscribe by RSS Subscribe by Email