Economist expects higher rates in Australia due to Greece crisis

08:28, May 10, 2010      

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Respected independent forecaster Access Economics on Sunday said Australia was likely to avoid a renewed slowdown in the global economy that happened in Europe, but it will lead interest rates continue to climb.

Access director Chris Richardson expected home buyers will face a further three interest rate rises this year that would take the official cash rate to 5.25 percent.

"So far it is mostly a European worry but it's a reminder all those bad debts didn't go away. There is almost as many public sector bad debts as there were private sector bad debts," Richardson told the Ten Network .

"That could reach out and slow the wider world economy."

But Richardson was optimistic that Australia could again avoid wider global problems.

"Chances are that Australia's recovery continues, interest rates continue to rise," Richardson said.

"We are now close to normal on that, but the economy itself is moving beyond normal and interest rates will do the same."

Treasurer Wayne Swan said he found his G20 counterparts at a recent meeting in Washington were still dealing with the consequences of the global recession, "wading through the rubble of high unemployment".

"We have a patchy global outlook," Swan told the Nine Network.

"If we do go through a new period of economic turbulence caused by events in Europe that we have seen in recent times, we are better placed than about any other advanced economy to handle that. "

Swan will hand down his third budget on Tuesday.

The Reserve Bank of Australia (RBA) has raised the cash rate for a third month in a row to 4.5 percent last week.

Greece's debt problems have continued to weigh on other euro countries, triggering widespread volatility in global financial markets last week.

European leaders were racing against the clock on Sunday to strike a new deal to fund debt-ridden euro countries and gain support from their central bankers before Asian markets open on Monday.

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