Swan watching developments in Ireland

Federal Treasurer Wayne Swan will be keeping a wary eye on developments in Ireland
but he doesn't think its debt crisis will have an immediate impact on Australia.
A massive bailout plan, possibly as much as 90 billion euros ($A125.3 billion), is
being put together for the debt-ravaged Irish nation through negotiations between
the Irish government, the European Commission, the European Central Bank and the
International Monetary Fund (IMF).
In contrast, Mr Swan said the outlook for the Asian region is still very strong.
He said authorities in Europe in the past six months have put in place a new
European-wide framework that can deal with the collapse of banks in member
countries.
"It also can deal with some of the sovereign debt problems we've seen in countries
like Greece," he told ABC Radio.
"That can certainly have an impact on markets, I think we're seeing that having an
impact around the world, and potentially on our market as well."
Opposition treasury spokesman Joe Hockey said it was clear that the global financial
crisis is continuing and that will have an impact on capital markets for some time.
"The events in Ireland, potential future events in Portugal and Spain will be
related to the previous financial crisis, therefore it is ongoing and it is going to
be a challenge," Mr Hockey told reporters in Canberra.
He believes 2011 is going to be a very challenging year on global markets, and that
is why he has been pursuing banking reforms, particularly as Australian banks are
amongst the biggest borrowing banks in the world for their size.
"You will see a tsunami of government debt in markets over the next 12 months," he
said.
"Now if there is a huge demand for money offshore with all these governments rolling
over their paper, the private sector rolling its paper, it's going to create real
challenges to the cost of funds in Australia, it may mean higher interest rates
again."
Treasury Secretary Ken Henry said rising interest rates are already having impact on
the Australian economy, which is likely to grow at an uneven pace for several years.
Dr Henry said some sections of the economy - such as mining, mining investment and
mining-related construction activity - are likely to see unprecedented strong growth
rates, while other sectors will likely see historically slower trend rates.
"There are sectors in the economy that are being affected, particularly by the high
exchange rate who are finding conditions more difficult," Dr Henry told a Senate
committee investigating the government's new taxes.
"There are businesses also, if not directly affected by the high exchange rate, that
are feeling the impact of rising interest rates and the dampening effect they are
having on demand."
This would result in labour and capital moving from the slower parts of the economy
to the faster parts.
"The external shock to which the Australian economy is adjusting and, by that, I'm
referring to the historically high commodity prices and the high terms of trade that
come with those historically high commodity prices," he said.
He said that external shock would quite possibly prove to be the largest that would
hit the Australian economy and is causing "quite a deal of structural change".