RBA good news drives sharemarket record

Australian markets have today continued to build on yesterday’s record high close, the S&P/ASX 200 pushing up 0.4% to 6477.9 by 11.30 am.

After an initial dip caused by weakness on US sharemarkets overnight, the S&P/ASX 200 quickly bounced back to push past yesterday’s record close of 6451.5, the new high almost 30 points above the previous best close of 6422.3 points achieved on July 24.

The main reason for yesterday’s surge was a Reserve Bank of Australia report that painted a fairly rosy picture of the Australian economy, and argued that the country’s financial system was well placed to withstand the volatility caused by the current international credit crisis.

And the good news campaign from the RBA has continued today, with deputy governor Ric Battelino putting a positive spin on the rapidly increasing debt levels of Australian households.

Battelino says the trend towards higher consumer debt levels we have seen recent years is likely to continue as householders take advantage of stable economic conditions and increased competition in the finance sector.

But, Battelino says, there is little to fear from historically high levels of household debt because the evidence shows that the people taking on the debt are those who can most afford it – primarily older, middle to upper income families using surplus income to upgrade their dwelling or purchase investment properties.

“Household sector finances remain in good shape: average real income is rising, even after interest payments; financial net worth has increased noticeably; gearing levels are not out of line with international standards; and the proportion of households experiencing financial difficulties, though higher than a couple of years ago, remains historically very low,” Battelino says.


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