- Westpac has forecast the local dollar will fall to US72 cents by December 2005 and to US64 cents by December 2006.
http://www.theaustralian.news.com.au/common/story_page/0,5744,15261673%255E1702,00.html
This is unambiguously good news for the Australian economy. It will restore our export competitiveness and reduce our horrendous trade deficit.
What does this have to do with the property industry you ask? Inflation. A lower AUD means higher inflation later this year, and it is the RBA’s job to control inflation by raising interest rates.
Last night the AUD fell half a cent to 0.7657.
Chart: http://finance.yahoo.com/q/bc?s=AUDUSD=X&t=1d&l=on&z=l&q=l&c=
Story: http://finance.news.com.au/story/0,10166,15272977-462,00.htmlThe main reason for the fall is the smaller than expected current account deficit in the US announced this week. It seems the weak USD of recent years is finally lifting America’s export performance and reducing their trade deficit.
Westpac expects the huge US current account deficit will stablilise, which will push back up demand for the US dollar, to the detriment of the local dollar.it amuses me that you wish this banana republic status upon us so eagerly, with a property market crash to boot. weak currency, reduced standard of living, higher interest rates, higher unemployment, a falling stock market – it’s all looking rosie. At least some inefficient farmers will be able to afford another mercedes next year.
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
it amuses me that you wish this banana republic status upon us so eagerlyMate, we are a banana republic. The Australian economy revolves around building houses for each other and digging stuff up out of the ground and selling it to the Chinese. The only way we can avoid becoming a banana republic is by broadening our economic base, because once those terms-of-trade turn against us, its gonna get nasty.
And BTW, our farmers are amongst the most efficient and least protected in the world. Its European, Japanese and American farmers who are inefficient.
Sounds good to me. I’m planning to hold the property buying for the next 2-3 years while I go to London to save as many pounds as possible. A lower AUD will increase the AUD value of everything I save, and then I can come back to Oz and pick up distressed properties.
The boom times will come again. I’ll just pick up properties at the market lows and then watch the market do my work for me in the next boom.
For those who are worried about a downturn in the Australian economy, working overseas (US, UK, Asia) might be a good strategy!
Alexonce the currency collpases you may as well switch off the lights, you will never dig your way out as no one can afford capital or energy to get things going. The strong resources industry which has pushed this currency up is a glimmer of hope in our short history to invest in some decent industry and change the nature of the economy. Boosting inefficient exporters by devaluing currency is not a step forward improving the economy.
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
once the currency collpases you may as well switch off the lightsRubbish! I don’t remember any lights going off when the dollar was at 48 cents (circa 2002 from memory). The economy was growing strongly at the time and the CAD was much smaller.
The strong resources industry which has pushed this currency up is a glimmer of hope in our short history to invest in some decent industry and change the nature of the economy.Sounds nice in theory, but that’s not what has happened in recent years. Rather than invest the dividend from the booming resource sector into productive enterprises, Australians have ploughed the money into housing.
We can’t sell our overpriced houses to the rest of the world!
Dmichie, just on your comment. What if the Chinese grow strong enough economically to start buying Australian property en masse? I’m thinking something like the late 70’s and 80’s with the Japanese buying up everything in sight.
Back then the Japanese were just flush with cash so they bought hotels, apartments, whatever in Australia and the rest of the world at ridiculous prices.
AlexWhat if the Chinese grow strong enough economically to start buying Australian property en masse?Point taken. I can see the Chinese investing the Gold Coast etc, but I can’t see it supplying enough demand to prop up the real estate market nationwide, or enough dollars to fix our CAD.
Originally posted by AUSPROP:Boosting inefficient exporters by devaluing currency is not a step forward improving the economy.
…but the alternative is raising interest rates – significantly. Which option would you prefer?
Cheers, F.[cowboy2]I remember the comment about the jobs we are producing in this country are for dirt diggers, farm hands and chamber maids. Oh yeah and chippies and plumbers.
The strength of our economy in recent years has been one boomer selling their overpriced house to another, kicked off by the First Home owner grant designed to save the Fed Govt from a blder lead revolt following GST.
They tampered with the economy many ppl joined the band wagon and here we are with no where left to go but down.
As for Chinese investing in RE at rates of return in 2-3% mark, you may be a little optomistic on that one. Have you ever tried to get any money out of China ???? It is no 1990 Japan.
And agree, I think a rate of 67% is pretty good, 48% was scarey though.
Originally posted by foundation:Originally posted by AUSPROP:Boosting inefficient exporters by devaluing currency is not a step forward improving the economy.
…but the alternative is raising interest rates – significantly. Which option would you prefer?
Cheers, F.[cowboy2]please expand… dmichie is saying the devaluation will lead to higher rates. are you saying if the currency doesn’t devalue we will hav higher rates?
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
“once the currency collpases you may as well switch off the lights”
“Rubbish! I don’t remember any lights going off when the dollar was at 48 cents (circa 2002 from memory). The economy was growing strongly at the time and the CAD was much smaller.
”
disagree… they were horrible times and frankly quite depressing being the laughing stock of the world. The brain drain that it created by skille dstaff heading overseas use to laugh about coming back and buying up the Sydney Oper House. People use to buy new hondas and trade them in years later at the same price as the currency was so hopeless. doesn’t sound like a healthy economy to me! Standards of living are vastly better now with a stonger currency and economy.devaluing currency = sick economy.
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Originally posted by AUSPROP:Originally posted by foundation:Originally posted by AUSPROP:Boosting inefficient exporters by devaluing currency is not a step forward improving the economy.
…but the alternative is raising interest rates – significantly. Which option would you prefer?
Cheers, F.[cowboy2]please expand… dmichie is saying the devaluation will lead to higher rates. are you saying if the currency doesn’t devalue we will hav higher rates?
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
Sorry for that, don’t know what in hell happened there, Oh yeah, it 7.00 on a Fri night time to go home.
Want I meant to say was , Yep we will raise our rates or money will flow to more attrative investments.
So its rates up or dollar down.disagree… they were horrible times and frankly quite depressing being the laughing stock of the world.Funny I don’t remember any recession or mass unemployment when the Aussie dollar was at 48cents. Sure imported goods might have been more expensive, but export-focussed businesses were thriving and putting on lots of staff.
Standards of living are vastly better now with a stonger currency and economy.Rubbish! Was Australia a third world nation three years ago? I must have missed that.
I don’t think we have ever had it better. Reductions in tarriffs on items like cars combined with the still-weak-but-not-as-weak-as-it-was dollar have certainly improved our ability to consume. The brain drain is a huge consequence of a weak currency and is still a big problem. Why on earth you would wish the currency to be any weaker than it is is totally beyond me…. other than a vested interest in selling cheap software overseas? I still think you are missing the point that price is not the barrier to exporters… it’s about creating a product that others want to buy, with price as a second or third consideration. Countries like Indonesia continue to see their currency slide and I don’t see any great revolution in their economies. I would love to see our dollar back on a par with the USD to return our sense of dignity. Otherwise we will just be a cheap tourist destination which is still too far away from amywhere despite people being able to buy a pint of VB for a pound.
http://www.megainvestments.com.auExtensive list of ‘Off The Plan’ property available for sale in Perth.
John – 0419 198 856
the still-weak-but-not-as-weak-as-it-was dollar have certainly improved our ability to consume.You say that its great that the AUD is strong, but we haven’t earned it.
Please tell me, how do we pay for all this consumption of imported goods? The answer is either debt or exports, and its all debt at the moment. Our current account deficit is already seven times larger than Costello’s much trumpeted budget surplus and it gets worse and worse and worse. Do you really think this is sustainable over the long term?
The strength of the AUD has very little to do with our so-called “strong economy”. It is mainly due to US dollar weakness (because of the “twin deficits”) and strong commodity prices. The AUD is actually riding on the strength of Chinese demand and massive financial mismanagement by the Bush Administration.
Current Account Deficit 1996-2005
http://203.26.51.178/cracker/54029_1.jpgI would love to see our dollar back on a par with the USD to return our sense of dignity.I think there is a lot more pride and dignity in seeing Australian products sold around the world don’t you? Parity with the USD is just some arbitrary number, besides the AUD has never been on par since in floated, the long-term average is 70c.
dmichie, the more you post, the more I want to see our dollar go through the roof to destroy the export markets.
Get over it!!!
Robert Bou-Hamdan
Mortgage Adviserdmichie, the more you post, the more I want to see our dollar go through the roof to destroy the export marketsCharming.
Don’t be a hypocrite David. You want home prices to crash so you can get a bargain and also the AUD to crash so you can make a larger profit margin. I would rather see exporters go down than all those who will be effected by your selfish dreams.
Robert Bou-Hamdan
Mortgage Adviser
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