Of course, with such a suggestion that would see our exchange rate fall to the lowest since the financial crisis, this sort of news is always set for an alarmist response.
How realistically will this forecast impact the life of the everyday Australian?
Or is it just a bit of argy bargy commentary between Deutsche and Merrill Lynch?
Merril Lynch argues that the Australian dollar will see continuity in its “bull trend“. It is suggested the cause for this is a combination of factors such as the strengthening of the US dollar, fluctuations in Australia’s mining industry and the narrowing Federal Budget. The probability of this outcome is also dependant on influences such as the (US) Federal Reserve and the upcoming actions of the Reserve Bank of Australia, which only last week published the most current statement of Assets and Liabilities. Deutsche are saying that the RBA are likely to keep the cash rate on hold at 2.5 percent over the next two years, with many economists suggesting the drop in the Aussie dollar will be less dramatic and of less impact.
Regardless, the demand for Australian resources is likely to have an ebb and flow effect, with some saying the labour market is expected to strengthen. And yet with China’s climbing iron ore inventory, conservative expectations are probably more realistic.
Quite frankly, while reading all this data all I could hear was Suze Orman saying “Denied”…
(Ed’s note – whatever happens, I reckon I might have to spend up big on Amazon now just in case we go back to those bad old days when you had to nearly double your calculations when making purchases in the USD and triple against Sterling…)