Australia and its iShares MSCI Australia Index (EWA) exchange traded fund (ETF) have managed to escape most of the problems associated with the U.S. subprime problems and subsequent credit crisis. Currently, EWA is up 31.7% year-to-date.

Australia’s Reserve Bank Deputy Governor Ric Battellino says although problems of the U.S. haven’t affected Australia, they do affect the health of the world economy. The global economy’s health is important to Australia because it impacts many of the exports the country produces, reports Andrew Trounson for The Australian Business.

However, Australia’s blessing of a booming economy could also be its curse. Aussies seem to be less frightened of debt because they haven’t been affected by the ramifications of it. Battellino says that Australian households have been running a "highly" mismatched balance sheet" consisting of property and shares on the asset side and debt on the liability side, reports Marc Moncrief for Business Day. Australia has experienced almost constant credit growth over the past 30 years. In the mid-1960s, credit was equal to about 25% of Australia’s gross domestic product (GDP), but it is now more than 150%.


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.