Why the falling iron ore price matters to every Australian business: Kohler

The rapid fall in the iron ore price in the past few weeks has exposed the core risk to the Australian economy: the currency needs to fall, but the banks still need foreign funding. The rising terms of trade and/or high Australian interest rates have kept the money flowing in for three decades to cover […]

Alan Kohler September 2, 2012

The rapid fall in the iron ore price in the past few weeks has exposed the core risk to the Australian economy: the currency needs to fall, but the banks still need foreign funding.

The rising terms of trade and/or high Australian interest rates have kept the money flowing in for three decades to cover a persistently negative current account, despite the resources export boom.

Banks are now desperately trying to increase domestic deposits, with some success, but still need to get 40 per cent of their funding from offshore.