The recession is over and the American economy is recovering. Hey, unemployment is down to 9.7%. Rainbows, lollipops, and pink freakin’ unicorns for everybody! I suppose if that were true, the world’s bankers would not be flocking to Sydney this week for a meeting that was scheduled last year.
THE world’s top central bankers began arriving in Australia for high-level talks as renewed fears about the strength of the global economic recovery gripped world share markets.
Representatives from 24 central banks and monetary authorities, including the US Federal Reserve and European Central Bank, landed in Sydney to meet tomorrow at an undisclosed location.
Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with extensive security believed to have been invoked by law enforcement agencies.
Speculation that the chairman of the US Federal Reserve, Ben Bernanke, would make an appearance could not be confirmed last night.
The event will be dominated by Asian delegations and is expected to include governors of the People’s Bank of China, the Bank of Japan and the Reserve Bank of India.
The arrival of the high-powered gathering coincided with a fresh meltdown on world share markets, sparked by renewed concerns about global growth and sovereign debt.
Fears that countries including Greece, Portugal, Spain and Dubai could default on debt repayments combined with disappointing US jobs data to spook investors.
Australia’s ASX 200 slumped 2.4 per cent to its lowest close since November 5, echoing a sharp fall on Wall Street.
Asian share markets were also pummelled, with Japan’s Nikkei 225 down almost 3 per cent and Hong Kong’s Hang Seng off 3.3 per cent.
The damage was also being felt by European markets last night with London’s FTSE 100 down 1 per cent in early trade.
Sovereign debt fears rippled through to the Australian dollar, which was hammered to a four-month low of US86.43 and was trading close to that level last night.
“This does feel like ’08 and ’07 all over again whereby we had these sorts of little fires pop up and they are supposedly contained but in reality they are not quite contained,” said H3 Global Advisers chief executive Andrew Kaleel.
“Dubai should have been an isolated incident and now we are seeing issues with Greece, Portugal and Spain.”
But it wasn’t all bad news with the RBA upping its Australian growth forecasts and flagging more interest rate rises this year.
The central bank estimates the economy grew 2 per cent in 2009, and will expand by 3.25 per cent in 2010, and by 3.5 per cent in 2011.
The outlook for global growth is likely to be a key theme of the high-level central bank talks.
The gathering also comes at an important time for the BIS as it initiates an overhaul of the global banking system, which will include new capital rules applying to banks and more stringent standards regulating executive pay.
A key part of the two-day talkfest will be a special meeting of Asian central bankers chaired by the governor of the Central Bank of Malaysia, Zeti Akhtar Aziz.
Influential BIS general manager Jaime Caruana is also expected to take a prominent role in the talks.
Federal Treasurer Wayne Swan will address the central bank officials at a dinner on Monday night.
File the information in this article away because I will be posting something I have been researching for quite some time now that has direct relevance to this meeting.