Signs of stabilisation in the global economy should convince the Reserve Bank of Australia (RBA) to leave official interest rates unchanged at its board meeting this week.

But economists say there is a chance of more rate cuts towards the end of 2009, if domestic and offshore economic conditions worsen.

All 20 economists surveyed by AAP expect the cash interest rate to remain unchanged at a 49-year low of three per cent, following the central bank’s June board meeting on Tuesday June 2.

RBC Capital Markets senior economist Su-lin Ong said the central bank would keep rates steady following further tentative signs that the world economy is stabilising.
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Bank writedowns associated with so-called “toxic assets” clogging up the global financial system could eventually reach $US4 trillion ($A5.73 trillion), the International Monetary Fund (IMF) says.

This is nearly double the amount the IMF predicted in January.

With this in mind, the IMF warns in its latest Global Financial Stability Report (GSFR), released on Tuesday, that costs to taxpayers could be greater if governments do not continue with policies to restore confidence in the financial system.

The IMF estimates writedowns on US-originated assets since the outbreak of the crisis will increase to $US2.7 trillion from its previous forecast of $US2.2 trillion.
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The economic downturn has evolved to the point where it is now possible to voice some optimism over the outlook for Australia without sounding dangerously naive.

Reserve Bank of Australia (RBA) deputy governor Ric Battellino on Tuesday looked on the bright side and actually sounded quite realistic.

He did not try to gloss over the effect of the global financial crisis and the ensuing Great Recession on the domestic economy, while addressing an urban development convention in Brisbane.
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Today’s guest post comes from Troy McErvale, Managing Director of Freedom Home Loans.

Until recently, I was a believer in the free market economy.

However, recent failures in financial institutions in particular provide more than enough evidence that free market economies are at best, falling spectacularly short of providing certainty for a government’s constituents, and at best simply do not work.

Our current “free market” format claims it carries with it certain protections, notably against anti-competitive behaviour, price gouging, profiteering, insider trading and employee exploitation.
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