G'day Gene,
I'm not subscribed from work - so would you mind passing on this attempt at
a response to your question?
You ask:
>What are the recent developments that have contributed to the currency
>meltdown in New Zealand and Australia?
>
>They are two commodity-dependent states selling into markets with weak
>prices. But that has been known -- is anything new happen to explain
>the dollar values melting like an ice-cream cone in July. (Northern
>Hemisphere.)
Well, everyone has a pet explanation. The appallingly glamorous David Hale
made a big splash when he smugly informed us we were a recalcitrantly 'old
economy'. No-one quite new what that meant, but they sold the Ozzie down a
whole cent over the next two days. That was the cent from 56 to 55 (three
weeks ago). The cent from 53.5 to 52.5 (the last two days) has is
generally explained with reference to the Europeans's determination that US
support for the Euro wouldn't be enough. They raised the rates; apparently
read by the young suits who run our world via their cross-currency
terminals as a vote of no self-confidence. It also puts pressure on
European investment and growth, I'd reckon.
They're the main blips. But blips is just blips. Something bigger is
afoot. We ARE decisively a commodity exporter, we DO boast singularly
pathetic R&D numbers (a real victim of this government's radical scaling
down of funding and subsidies over the last four years), and our listed
companies are not offering the returns on capital boasted on Wall St (13%
as opposed to 21% - Germany is hovering around 12.5%). Our stock market is
also very dependent on relatively few companies (of which one is 'old
economy' [BHP], one is in the languishing telco sector [Telstra] and a
third is the unpredictably fluctuating NewsCorp).
So it's the US basically - sucking investment capital from everybody else
on the strength of fragile but, hitherto, enduring numbers. Our CAD is a
big problem for the Ozzie, but, as yet, the equally persistent and growing
CAD that characterises the US economy is not a problem there. So, for the
moment, we're stuck in a vicious circle: structural CAD (inevitable for a
commodity exporter/technology importer) -> lower currency -> fear of
inflation (especially in transport, communications, and machine tools) ->
lower currency -> lower currency etc etc. It'd have to be basically the
same across the Tasman.
But I agree with you that US trends hint at some important numbers peaking
there, and then that CAD and all that fragile debt might suddenly come home
to roost. So, whilst we might come off another couple of cents yet, I
reckon a rapid readjustment might be in the breeze (I'm still not sure it
won't be a gale).
Cheers,
Rob.
