Australia can resist US wobbles

Australia is now better able to continue to prosper in the face of US economic wobbles than it has been in years past, influential Treasury Secretary Ken Henry said yesterday.

“Whilst the US economy remains important to the Australian economy, it does not depend overwhelmingly on what happens in the US,” Henry told a Melbourne Institute economic forum.

Henry’s comments, strong results in the US overnight, and positive consumer confidence figures released today, have all contributed to a 0.5% rise in the ASX/S&P 200 by 1pm today.

US markets lifted strongly overnight after US Federal Reserve Governor Ben Bernanke was considered to have left the door open for an interest rate rise in speech yesterday. US markets are now betting that the Fed will cut interest rates by 0.5 basis points when it meets on 18 September.

The Westpac-Melbourne Institute consumer sentiment index has bounced back in September, increasing by 4.2% after an 8.1% drop in August.

The result suggests consumers have shaken off any nerves that resulted from international credit wobbles that took place predominantly in August. The outlook for economic conditions over the next 12 months surged by 7.3% to be 27.1% higher than this time last year. However, the measure of whether it was a good time to buy a house dropped by 7.9%, suggesting there is still some uncertainty about interest rates.