The Australian sharemarket has opened over 2% higher this morning after news Greece had abandoned plans to hold a referendum on its debt bailout package, with the country being pressured by both France and Germany to come up with a long-term solution.
The benchmark S&P/ASX200 index was up 95 points or 2.3% to 4267.3 at 11.45 AEST, while the Australian dollar also rose to $US1.04c after the news became known.
AMP shares rose 1.94% to $4.21, while Commonwealth Bank shares rose 1.92% to $48.93. ANZ shares rose 2.39% to $20.98, as Westpac rose 2.65% to $22.08.
In the United States, the Dow Jones Industrial Average rise 1.8% to 12,044.
The entire world is watching Greece after Prime Minister George Papandreou abandoned his original plan to put to referendum a European rescue deal.
That decision comes as the G20 meeting is held in France, where US president Barack Obama has urged local world leaders to sort out the crisis as quickly as possible. It also came as the European Central Bank decided to slash interest rates, prompting a rally in American stocks.
Speaking to Parliament, Papandreou hinted that he may step down, with the Government only hanging on to power with a two-seat majority – independents have hinted their loyalty may shift.
“I don’t care about being re-elected. I am interested in saving the country,” he said, hinting that a transitional government is a possibility. “Let everything be discussed – the makeup of the government and anything else… I am not glued to my seat,” he said.
“My position is crystal clear: Let talks start immediately to create a formation that is broadly accepted, efficient and able to deal with the national interest in this difficult time for the country.”
The European crisis presents a significant risk to the Australian economy if it continues to deteriorate, according to the latest Reserve Bank statement on monetary policy.
The statement comes just a few days after the RBA decided to cut the official interest rate to 4.5%., the first move in a year.
The statement shows that risks to the European economy are connected to the local economy, although Australia would be somewhat protected due to links with Asia.
“Commodity markets could be expected to weaken and growth in domestic incomes would be lower… some planned expansions to coal and iron ore capacity could, in a downside scenario, be delayed.”
The risk of this global downturn is the main downside risk for inflation, the RBA noted, with the experience of 2009 showing that domestic cost pressures can easy quickly.
“On the upside, while the central forecast is for inflation to remain consistent with the 2-3% target range, there is some risk that the recent easing in wage pressure reported in business liaison may turn out to be temporary.”
Qantas chief executive Alan Joyce has told a Parliamentary Inquiry that amendments proposed for the Qantas Sale legislation would stop the company expanding into Asia and could cost jobs.
“The bill being proposed would not do more to protect Australia’s Qantas,” he said. “It would not protect Australian jobs and it would have the opposite effect.”
“This is protectionism… If you want to survive and succeed we must be free to pursue global opportunities.”
Joyce was questioned over the company’s decision to ground the entire Qantas fleet last Saturday, with senator Nick Xenophon asking whether he had made that decision as much as a day earlier.
“I didn’t have any view on the prospect of it,” he said.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
