The Aussie dollar’s fall has taken a lot of pressure off the economy by making exporters and import-competing businesses more competitive.
That’s a boost the economy, in a very slow transition from the mining boom, needs. It is also a boost that the RBA wants.
But while the Aussie sits around 78 cents, more than 30 cents from its all-time low against the US dollar, it has just printed a new all-time low against the New Zealand dollar (Kiwi) of 1.0294.
Rate cuts without traction, an internally focused government, a growing budget deficit, structural step down in the terms of trade and now threats to Australia’s AAA rating are all weighing on investor and trader perceptions.
The ANZ currency strategy team says it has all led to “a fraying in the perceptions that Australia is a bullet proof haven for capital and adds weight to our expectation that the AUD is developing an image problem”.
The ANZ says the disquiet felt by currency traders is “best demonstrated in AUD/NZD which hit a fresh historical low last week”.
The bad news for those who are travelling to New Zealand on holiday or sipping Marlborough sauvignon-blanc – and for those of us worried the Kiwis might do an All Blacks in the Cricket World Cup – is the ANZ reckons the AUDNZD fall will continue.
“Momentum suggests that this cross is at risk of reaching parity in the next couple of months,” they said. But the “parity party” will be brief as the ANZ doesn’t believe the move will be sustainable.
That’s good news. A world where the Aussie dollar can’t even buy one Kiwi dollar just doesn’t seem right.