SYDNEY (Reuters) -A senior Australian central banker said on Wednesday the country’s financial conditions were influenced by global factors, with low equity risk premia and credit spreads suggesting conditions may be easier than otherwise.
In a speech in Sydney, Penelope Smith, head of international department at the Reserve Bank of Australia, said the cash rate is not the only influence on the cost of finance in Australia, but the extent of impact from international developments was highly uncertain.
The structure of the financial system, which is dominated by banks, could mean the developments in capital markets are less important for financial conditions than in other economies like the United States, Smith said.
“There is a lot of uncertainty about where neutral rates are and where they are going. What we can perhaps conclude, though, is that they have not fallen since the pandemic and may have even risen,” she added.
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(Reporting by Stella Qiu; Editing by Lincoln Feast)
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