Yabby,
Wanting to avoid a housing bubble would be a reason for the RBA to increase interest rates, but not a reason for them to keep our interest rates higher than any particular country or group of countries.

Current account figures bear very little relationship to currency movement expectations, and currency movement expectations are only a minor component of the cost of government bonds.

The Greek people don't want to leave the EU, but their attitude to the Euro is more ambiguous: they want to stay in it, but not at any cost. They have themselves to blame for getting into the mess they're in, but other Eurozone members, particularly Germany, are preventing them from getting out of the mess while remaining in the Eurozone.

It was the overvalued Australian dollar (driven by unnecessarily high comparative interest rates) which prompted so many companies to go elsewhere. But companies move country all the time. Our problem isn't their departure; it's the lack of replacements. And that's partly because interest rates set for eastern Australia are too high for SA, and the Federal government is failing to adequately compensate SA for that. Although admittedly there's also the Federal takeover of industrial relations, setting uniform wages in all states when historically they've been lower in SA.

*Current account figures bear very little relationship to currency movement expectations*

Well no, they would be a very important part of evaluating the future of a currency. A country which needs to borrow ever more to stay afloat financially, is clearly not doing so well as a country which is getting richer. When our banks borrow overseas, which is where in the past alot of their funding has come from, they borrow in US $ or Euro. They have to pay the going rate of interest plus hedging and that hedging cost is a market judgement. -6% GDP, as Australia has often faced in the past, tells us that there is a problem. You are free to deny all this of course, but that will not change the facts.

If Greece wants to stay in the EU, then they should stop blaming Germany and everyone else and start fixing the many things that are wrong in Greece. Like paying their taxes.

*Our problem isn't their departure; it's the lack of replacements.*
Well yes, it is the lack of entrepreneurs who crunch the numbers and can see no reason to risk investing in Australia. I don't blame them. I too would rather invest in a place where workforce demands are more reasonable. All those expected bells and whistles are IMO a joke.

Yabby,

The country does not need to borrow just to stay afloat financially. We would stay afloat even if we completely stopped borrowing from overseas. But there's a lot of foreign investment in Australia because the investors expect it to be profitable.

When our banks borrow overseas, they have to pay the going rate. Where they hedge, they have to pay the going rate INCLUDING hedging. And the going rate including hedging is effectively determined by the RBA cash rate, as that's by far the biggest influence on how much the market charges to hedge. The markets are very competitive now; we'll never return to the days where businesses could cheaply borrow yen and hedge for much less than the cost of borrowing locally.

For long term currency movements, the trade balance is far more important than the current account balance. But it's not just the actual figures: markets anticipate future movements.

Who are you to say what Greece must do if it wants to stay in the EU? After all, you're so ignorant of their situation that you think they haven't started fixing the problems! In reality they've done a lot to address the problems that caused the crisis.

Germany is GENUINELY to blame for insisting on conditions that weaken the Greek economy and prevent its recovery. Can't you see that Greece can't get the economic benefits from enlarging its workforce by raising its retirement age if there aren't even enough jobs for the existing workforce to do?

There are lots of ways to make Australia a better place to do business in. Worsening working conditions is probably the second worst, after scrapping environmental regulations.

*The country does not need to borrow just to stay afloat financially.*

We can do as we do right now. Just sell off a bit more of Australia, to cover our bills. The current account matters at it includes everything and we do in fact have to pay interest on past borrowings. Trade figures only give us limited information regards trade, not our total financial position.

*And the going rate including hedging is effectively determined by the RBA cash rate, as that's by far the biggest influence on how much the market charges to hedge.* Well no. Markets do not need to lend to Australia. Overseas investors perceptions can differ. Amazing how you think you can predict the future.

*Who are you to say what Greece must do if it wants to stay in the EU?* I never did say it was for me to say. It is for the EU to say, Greece can accept or reject. Forget blaming Germany, it is time they blamed themselves and fixed their own problems. I speak to people who go to Greece, they tell me why they would not invest there. None of those things can be blamed on Germany, all Greek created problems.

*Worsening working conditions is probably the second worst,* Believe whatever you will. No doubt those entrepreneurs will flock to South Australia, if you are correct. Freeing up our labour market would be the fastest way to create jobs IMO, but people will learn the hard way. Living in denial is a common human foible, be that here or in Greece