RISK PREMIA IN AUSTRALIAN INTEREST-RATES

The level of and movements in interest rates and the exchange rate can have a substantial impact on the economic performance of Australia's primary industries. Whether a country and/or exchange risk premium has resulted in higher interest rates and increased volatility in the exc hange rate is therefore important to these industries. There is some e vidence that a small country risk premium may have emerged during the early 1990s. In line with earlier studies, however, no evidence was fo und of such a premium during the 1980s. A further finding is that any exchange risk premium may have declined over the last decade or so. Po ssible links between risk premia and Australia's foreign debt and curr ent account deficits are also examined.