Money

Western governments are borrowing at record highs – does it matter?

Published

1 year ago

March 7, 2024

Ahron Young

In its latest report on global debt, the Organisation for Economic Co-operation and Development has projected a surge in government borrowing, reaching an unprecedented $15.8 trillion this year.

The Paris-based research body revealed that gross borrowing, encompassing both refinancing of maturing bonds and new issuances, climbed from $12.1 trillion in 2022 to $14.1 trillion in 2023.

This substantial increase in borrowing is attributed to the ongoing economic repercussions of the COVID-19 pandemic, which prompted governments worldwide to embark on massive borrowing to support households and businesses.

The OECD noted that the total borrowing is expected to surpass the previous peak of $15.4 trillion recorded in 2020.

A significant portion of this year’s borrowing, approximately $12.6 trillion, will be directed towards refinancing maturing bonds issued during the pandemic.

However, the surge in inflation post-pandemic has led to higher interest rates, causing the average cost of new borrowing for governments to spike to 4% in 2023 from 1% in 2021.

Economic output

Consequently, the cost of interest payments for governments has escalated, accounting for 2.9% of annual economic output in 2023 compared to 2.3% in 2021.

The OECD warned that this trend is expected to continue, projecting a further half-percentage-point increase in interest payment costs by 2026.

Moreover, governments are anticipated to encounter challenges in finding buyers for their debt as central banks begin to reduce their holdings of government bonds, which were amassed in efforts to stimulate growth and inflation following the global financial crisis.

With central banks gradually withdrawing from the bond market, the OECD highlighted the need for governments to attract more price-sensitive investors, such as non-bank financial sectors and households.

The report supported that central banks in OECD member countries currently hold government bonds equivalent to 30% of annual economic output, mirroring the surge in total government debt since the financial crisis.

The OECD anticipates a record level of net bond supply to be absorbed by the broader market as central banks embark on quantitative tightening.

Money

Markets surge as Fed hints at July cut

Fed’s Waller hints at July rate cut, boosting investor sentiment; Trump imposes 50% tariff on Brazil, provoking minimal market response.

Published

31 minutes ago

July 11, 2025

ticker NEWS

Fed’s Waller hints at July rate cut, boosting investor sentiment; Trump imposes 50% tariff on Brazil, provoking minimal market response.

Fed Governor Christopher Waller, tipped as a possible next Chair, signalled a July rate cut is on the table, calling current policy “too tight.” That’s been enough to supercharge investor sentiment.

Meanwhile, Trump has slapped a surprise 50% tariff on Brazil, sparking political tension. Brazil’s President responded with tough talk on “sovereignty,” but markets barely blinked, the Brazilian real dropped just 1%.

#StockMarket #FederalReserve #Bitcoin #AUD #TrumpTariffs #TickerNews

Money

Trump’s copper tariff shakes global markets

Trump’s 50% copper import tariff aims to strengthen U.S. manufacturing, impacting global supply chains and Chile significantly.

Published

1 day ago

July 10, 2025

ticker NEWS

Trump’s 50% copper import tariff aims to strengthen U.S. manufacturing, impacting global supply chains and Chile significantly.

President Donald Trump has unveiled plans to impose a 50% tariff on copper imports, a move set to rattle global supply chains and redraw the industrial map.

The tariff will hit within weeks, with Chile, the world’s largest copper exporter, expected to bear the brunt.

While Australia’s direct copper trade with the US is limited, analysts say the real message is strategic: the US is reinforcing its domestic manufacturing power.

#CopperTariff #DonaldTrump #TradeWar #GlobalMarkets #TickerNews

Money

RBA unexpectedly keeps interest rates steady at 3.85%

RBA surprises with decision to maintain interest rates at 3.85%, impacting economic forecasts and housing market activity.

Published

3 days ago

July 8, 2025

Ahron Young

RBA surprises with decision to maintain interest rates at 3.85%, impacting economic forecasts and housing market activity.

In Short:
The Reserve Bank of Australia has kept its cash rate at 3.85% despite concerns from the Housing Industry Association about its impact on new home construction. Although inflation is within target and there’s some market confidence, households are under financial strain amidst economic uncertainties.

The Reserve Bank of Australia has decided to maintain the cash rate at 3.85% following a split vote of six to three. This unexpected decision comes as the Housing Industry Association warns that these rates remain restrictive, potentially hindering new home building.

Senior economist Tom Devitt stated that the rates will delay necessary building activity but noted improved market confidence following previous rate cuts.

Current inflation data shows the RBA’s preferred measure has been declining and remains within the target range. However, household spending is under strain, with Australia experiencing a per capita recession since mid-2022.

Labour costs

The RBA’s decision was influenced by concerns over productivity growth and high unit labour costs, affecting its inflation outlook. While some economists anticipated a rate cut, the RBA opted for caution due to economic uncertainties, both domestically and internationally.

The bank acknowledged gradual recovery in private demand and household incomes but highlighted ongoing challenges in passing cost increases to final prices.

Despite the hold on rates, price rises in essentials like petrol continue to impact Australian households. The RBA emphasized the need for ongoing assessment before making future rate changes, suggesting a careful approach in response to evolving economic conditions.