Interest rates

• Overall


  Costs of borrowing money (exchange rates need to be considered)

  Not only does going global involve more risk it means there is a need for funds to pay for the expansion

  Australian take advantage of lower interest rates

  Overseas interest rates on loans/borrowings (beneficial if they are lower)

  Follow international law or legislation concerning tax

  A business that plans to either relocate offshore or expand domestic production facilities to increase direct exporting will normally need to raise finance to undertake these activities
• Taking advantage of overseas interest rates


  Australian interest rates are typically higher than other countries → businesses in Australia therefore are tempted to borrow the necessary finance from an overseas source to gain the advantage of lower interest rates. However, there is a huge risk with undertaking this kind of activity due to exchange rate movements → any currency fluctuation could see the advantage of cheaper overseas interest rates quite quickly eliminated, therefore in the long run, ‘cheap’ interest rates may end up costing more