Is the Australian economy losing its shine? The flippant answer is look at their cricket
team, not the dominant force they once were J
However the more considered answer is that the economic
slide is partly due to circumstances beyond the government’s control.
Commodity prices have fallen, the Australian economy has
been based around mining and commodities so a period of adjustment is to be
expected.
Event Risk - RBA Announcement (4th August 05:30)
What impact will lower interest rates have and is this tool
the answer?
Lower interest rates are fuelling ‘Asset Bubbles’.
This is a global story but the Sydney Housing market is the
extreme, up a staggering 18.4% (yoy) whilst economic growth has not reached
over 3%
So why reduce rates further?
The currency is 35% lower over 4 years surely this
should help exporters however the jobless rate is still stuck around 6% and
business confidence surveys are not at the level the government would like. A cut is the short term fix but there is a longer
term issue.
The cash rate is at 2% and very few expect a cut to 1.75%
(25 out of 28 economists polled by Bloomberg have rates on hold.)
We get the quarterly monetary policy statement on Friday the
last two times the Reserve Bank Board members meet before this statement they
cut 25 basis points
As the proverb goes being forewarned is forearmed.
Anish S. Lal @anish8fx
FX & Precious Metals, Atom8
Financial Services LLP
2nd Floor, Centenary House, Palliser
Road, London W14 9EQ, UK
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