The Debt Crisis in US and its Impact on Australia

The debt crisis has had an impact not only the national economy but also has been creating international impacts throughout. This is happening because the size of US economy is huge and the debt level is high too.

Thus, the other economies like that of Australia will require to try and expand their economy in order to offset the decline of the US economy. At least that is what the economic experts are saying. In their bid to becoming debt free, US has been complicating situations all the more.

US Debt Crisis and Australia

As the result of the huge amount of debt that our nation now holds and due to the other related debt problems, the value of the dollar has lowered furthermore in comparison to any other currencies in the last few months. Rather in comparison to our US dollar, the Australian dollar has been gaining in value. This as a result is going to affect the export system of our country and this in turn is going to have a bad effect on the high-growth resources sector too. Some economic experts suggest that the Australian dollar can even raise USD1.20 to USD1.25 in the coming months and this is the result of the US debt crisis and the recession.

The experts are also of the opinion that the impact of the debt crisis is going to fall on the value of the US government bonds which are especially held by the other countries and more so particularly by China. It is considered to be the largest holder of the US treasury bonds. It is being said that in all probability, China will start to look for some of the alternate sources of financial investments and this can have serious consequences over the Chinese economy and also on that of Australia. The Australian investors of the US government debts may also have to face some significant losses and this is because the value of these investments or holdings is supposed to fall as some new debt gets issued which will be resulting in higher interest rates than what is currently being paid against the existing bonds.

Actually, if the ceiling would have been raised without any of the restrictions which have been imposed, all of the borrowings may have continued just at about the current levels till the private sector may have seen some recovery as this might have been able to permit some levels of ease in the growth of the public expenditure. But now with the restrictions on the debt ceiling, the government no doubt will be required to follow some severe cuts on spending. This, the experts say is going to result in additional economic downturn in our country.