simply no inevitability that economic growth
in Australia will slow further. Prior to the
GFC,year-togrowthdippedto2.5%orless
in2006,2003,2000and1997(seechart).
years or so. In none of these four cases did the
economy finish in recession and it remains an
unlikely outcome in this current case.
towards fair value. At time of writing, it
stands around 92 cents (still well above my
estimate of 80 cents for its `fair value'). The
RBA is standing on the sidelines cheering
the dollar on.
economy about equal to a quarter-point rate
cut. It makes our exports easier to sell, and
makes domestically produced goods more
competitive with those from offshore
(fresh-baked bread at Coles, for example).
Thus the decline in the currency to date
should do the work of two rate cuts.
investors. Since the recent peak in our
market,the$Ahasfallenby8%,soaUS
investor in our market is down by about
16%inthepastfiveweeks.
may be right. My view is that, given that the
cash rate is at a record low, the RBA will be
extremely parsimonious in cutting further.
It is probably hoping the rate cuts already
in place will get more traction, and that the
lower exchange rate will help enough to
obviate the need for further cuts.
5300fortheASX200attheendoftheyear.
The ongoing weakness so far this month
has persuaded me to revert to my original
forecast, published in early January, of 5100.
original forecast finished up being too high
by just 51 points. The lesson: never change
a forecast until you are absolutely sure that
it's wrong.
MARKETS