As I mentioned earlier, it is common practice for Australian banks to hedge their foreign currency borrowings with derivatives to insulate themselves and their Australian borrowers from fluctuations in foreign exchange rates and interest rates. The most recent survey of hedging practices showed that around 85 per cent of banks' foreign currency liabilities were hedged (Graph 3).
This outlook for economic activity is also confirmed by available forecasts from international organisations and private sector institutions. The risks to economic growth appear to be broadly balanced over the shorter term. Further ahead, downside risks still relate to potential increases in oil prices and concerns about global imbalances.