The Aussie dollar hit a 10-year low against
the US dollar yesterday, 7 August 2019. It fell to less than 67 US cents after the
Reserve Bank of New Zealand slashed interest rates by half a per cent, cutting their official
cash rate to a record low of 1% — the same as Australia’s. Craig James, Chief Economist at CommSec, said
that although the low dollar may be a headache for Australians travelling overseas, it would
be a welcome relief for the Reserve Bank of Australia. He wrote, “The weaker Aussie dollar will increase
the attractiveness of Australian goods on the global stage and against imported products.” Rabobank’s Michael Every commented on the
recent global currency wars. He wrote, “We got the RBNZ governor Adrian Orr basically
promising to do whatever it takes: more rate cuts, negative rates, quantitative easing
— you name it. There will be no keeping the powder dry. As a result, the New Zealand dollar plummeted
below 64 US cents like a Kiwi trying to fly; and the Australian dollar fell to a decade
low below 67 like a wombat trying to fly — which is a great analogy for the RBA actually.” Chris Weston, Head Of Research at Pepperstone,
had concerns regarding the New Zealand rate cut. He wrote, “If you want to get ahead of the curve then
the RBNZ does this better than most, and is not one to mess around. One questions if this is a message that they
are genuinely worried and, if so, should we be too?” Other news is reporting that the construction
industry in Australia is in a deep recession. The Australian Industry Group / Housing Industry
Association’s Australian PCI fell by 3.9 points in July to 39.1. This is the sharpest decline in activity in
six years. Scores of less than 50 indicate a contraction
in the industry. This is the eleventh consecutive month of
contraction in the Australian PCI. Head of Influence and Policy at the Ai Group,
Peter Burn, spoke of the construction slowdown. He said, “Looking ahead, conditions look more fragile
than they have for some time with new orders dropping further into negative territory driven
by particular weakness in the pipelines of new work in the housing and apartment sectors.” Dr Burn also spoke of the contracting Selling
Prices sub-index. He said, “This negative reading indicates that rising
input prices and other costs are not, on average, being passed on to customers, as profit margins
continue to be squeezed for businesses in the construction industry.” It’s probably also no surprise that home
loan approvals are down. Investor loan approvals are down to $4.37
billion, while owner-occupier approvals are down to $12.45 billion. Will all these recent rate cuts have the desired
effect of increasing people’s desire to get into more debt? Time will tell I suppose. Market economist at NAB, Tapas Strickland,
spoke of the recent lending activity. He said, “Overall, the data is consistent with anecdotes
of enquiries picking up following the May election, though new lending activity is still
around the lows last seen in 2013. Although not market moving, finance approvals
are likely to be watched closely by the RBA in order to help assess whether recent cash
rate cuts — and APRA’s recent easing of macro-prudential — is filtering through
to the housing market and the economy in general.” There’s also the looming threat of the effects
of a US-China trade war on the Australian and global economies. Experts are warning that the combination of
a falling Australian housing market, global currency wars, and the ongoing threat of a
trade war, could spell disaster for the Australian economy. Andrew Charlton, Director at AlhpaBeta, and
former economic adviser to Kevin Rudd during the Global Financial Crisis, spoke of these
recent economic concerns on ABC’s AM. He said, “We have a number of really important frailties
in our economy, like very high debt levels, like the ongoing play-out of a housing correction. It’s only been this week that the RBA has
downgraded our GDP growth. Australia is in a vulnerable position and
the prospect of an external shock caused by a trade war and a currency war could be very
serious for us. Markets have been spooked because they’ve
been forced to recognise there is little prospect of a quick deal to end the trade dispute. It’s harder to see a rational economic solution
when part of the causes of this dispute are geopolitical. I think the worrying thing is we don’t know
how it will end.” Australian Treasurer Josh Frydenberg seems
to be one of the few people staying positive about the ongoing trade war. He told AM, “We shouldn’t overreact to these developments
but we should recognise that China’s currency moves and the increase in US tariffs are an
unwanted escalation. Right now, the Australian Government would
like to see cool heads prevail. We’ll still deliver a surplus next year. We’re still determined to do that. The Australian economy remains sound despite
some of the challenges we face domestically and internationally.” What do you think? Is Mr Frydenberg correct? Is the Australian economy sound, despite trade
wars, currency devaluations, interest rate cuts, and a construction industry in free
fall? Or is he just lying to the Australian public?

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29 thoughts on “Aussie Dollar | NZ Rate Cut | Construction Recession | Trade Wars”

  1. Your the only one ive seen say it , when it went under 70c no one said anything, Gold is the only Hedge Against the loss of wealth. 1c loss is a $5000 Gain in my gold value people dont realize the loss in real value, This is not a capital gain simply holding wealth.

  2. Needs to change his name to Josh Fried-Brain, and any comments from any of the big 4 can't be trusted. Even Tom from Con-Bank makes out all is good. Mainstream media feeding the zombies and not seeking independent advice. Crash & Burn, it's to late.

  3. Do not think this is not planned and controlled by the private bank cobal…THE CORRUPT BANKS WANT ""NEGATIVE INTEREST """This is where you pay the bank to have your money ……REMEMBER THIS The corrupt corporate government is attempting to bring in a law to STOP you withdrawing cash ….to """lock you into their shifty BAILIN laws"""to appease the IMF……WAKE UP AUSTRALIA

  4. Nice overview.
    I don't think the Australian Economy is in a downfall YET. There could be ways to avoid stronger adverse effects of the incoming slowdown, given that MOST people were already hit back in *2016*.

    I think Australians are still spooked by the Mining slow down and the counter-effects of the Chinese economy's bust on their own real estate. But to be honest, every Australian KNOWS this was going to happen, and lots of them were calling for the debt craze to come to an end. It is not going to be all smooth but, as usual, "She'll be alright" in the medium term (i.e 2020-2023).

    Take it easy all of you and avoid rushing into rash decisions because that's precisely what Trump and Xi have been doing for the past 3+ years…Look at what happened to their economies as a result! πŸ™

    Edit: Missing date, spellings.

  5. For any country, fall in local currency is a good thing if the inflation is kept within control. This is exactly happening in Australia – isn't it good?

  6. Freydenberg is a wanker. Does he think the Australian people are that gullible And stupid. If the government doesn't do something soon to protect our economy we will crash and burn.

  7. DONT BE FOOLED……This is all controlled by the Global Banking cabal….this is setting the world up for NEGATIVE INTEREST RATES
    This Australian Government is in collusion with the corrupt banks..

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