Expert: Australian rate hike to benefit world economy

Is the Southern Hemisphere warmer than the Northern Hemisphere? It certainly is economically. Australia is set for faster economic growth and shrinking budget deficits as it outperforms much of the developed world, marked by its second interest rate hike within a month. Will the Northern Hemisphere catch up soon?

The answer is negative. Experts say although Norway, Israel and India have adjusted their monetary policies, major economies like the US, Europe and Japan are unlikely to follow suit in the short term.

US lender CIT Group's bankruptcy on Sunday fueled more concerns that recovery in the world's biggest economy is not at all firm, despite its third quarter GDP rose to 3.5 percent. With a near 10 percent unemployment rate, the Federal Reserve is very unlikely to change its loose monetary policy. Many do not expect a rate hike until the middle of 2010.

But experts from the Chinese Academy of Social Sciences, China's top think tank, say interest rate hikes in Australia and other countries will benefit the world economy.

Liu Yihui, Director of China Economy Assessment Center, CASS said "Their interest rate moves will curb price hikes in oil, minerals and large scale commodities. That's good for the structural adjustment of the world economy, especially the US economy."

The Australian government now sees economic growth of 1.5 percent for the year end through to June 2010, compared to a contraction of 0.5 percent just six months ago. It also lowered its forecast for unemployment to peak at 6.75 percent, down from 8.5 percent.