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Australia's Risk Of Default Rises

Discussion in 'The Economy' started by Chris C, 23rd May, 2009.

  1. Chris C

    Chris C Well-Known Member

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    According to CMA, a CDS specialist, Australia's risk of default skyrocketed on Friday, increasing 16% to a 5.91% chance of default over the next 5 years.

    5.91% may seem low, but it definitely puts us up there as one of the most risky developed nations. Though at the same time we are considerably less risky than the likes of Argentina, Ukraine and Venezuela who all currently have a percent chance of default over 60%!
     
  2. uinvestinme

    uinvestinme New Member

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    Thats quite scary, for every 100 loans given out 6 will default.

    Do you think it's simply due to businesses collapsing or also banks unwilling to refinance loans and/or with higher interests?
     
  3. Chris C

    Chris C Well-Known Member

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    This wasn't referring to business or home loans - it was referring to the Australian government itself defaulting!
     
  4. davo6253

    davo6253 Well-Known Member

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    Out of curiosity what exactly happens historically when a country defaults? Apart from the people with bonds getting nothing back I assume.

    Cheers,
    David
     
  5. Chris C

    Chris C Well-Known Member

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    It varies a lot depending on circumstances as a nation itself can't file for bankruptcy (plus they can normally just print more money to finance interest obligations).

    Generally there is a process of renegotiation between sovereign states and the bond holders to find some middle ground over how they can continue to service the debt and often going forward countries restructure bonds in more secure currency denominations, normally USDs, protecting bond holders from debasement of the currency.

    I think doing some research on google about sovereign defaults would be very interesting given the world we live in and the high likelihood that we are probably entering a period where there will be a lot more of them.