Aussie boom a mixed blessing
Source: Bloomberg News |
August 1, 2011, Monday
|
Print Edition
Print Edition
AUSTRALIA'S investment boom, driven by new resource projects, is a "mixed blessing" for the economy as a rise in the local dollar hurts the manufacturing and tourism industries, Treasurer Wayne Swan said.
"Clearly the high dollar is making life pretty tough for many trade-exposed sectors," Swan said in his weekly economic note released yesterday. "The lingering effects of the global financial crisis are adding to this, with a cautious consumer and tighter credit."
The country is undergoing what the Reserve Bank of Australia calls a structural change - a shift in productive capacity to the mining and construction industries while the stronger currency hurts exporters, education, tourism and manufacturing. Prime Minister Julia Gillard's government estimates that mining investment will reach A$76 billion (US$84 billion) this fiscal year.
Demand from Asia for Australian commodities is driving the new investment, such as the approval by ConocoPhillips and Origin Energy Ltd of the first stage of a US$20 billion liquefied natural gas project in Queensland state. The so-called Aussie, the world's fifth-most traded currency, has risen 22 percent against the US dollar in the past 12 months as the mining boom drove unemployment below 5 percent.
The RBA will keep its overnight cash rate target unchanged at 4.75 percent when it meets tomorrow, according to 21 of 25 economists surveyed by Bloomberg News last Friday. The nation's benchmark rate is the highest among the world's developed economies.
The Australian dollar traded as high as US$1.1081 last week, the highest since the end of exchange controls in 1983, after a government report showed second-quarter consumer prices rose more than forecast.
Consumer sentiment this month fell by the most since Lehman Brothers Holdings Inc collapsed in 2008.
"Clearly the high dollar is making life pretty tough for many trade-exposed sectors," Swan said in his weekly economic note released yesterday. "The lingering effects of the global financial crisis are adding to this, with a cautious consumer and tighter credit."
The country is undergoing what the Reserve Bank of Australia calls a structural change - a shift in productive capacity to the mining and construction industries while the stronger currency hurts exporters, education, tourism and manufacturing. Prime Minister Julia Gillard's government estimates that mining investment will reach A$76 billion (US$84 billion) this fiscal year.
Demand from Asia for Australian commodities is driving the new investment, such as the approval by ConocoPhillips and Origin Energy Ltd of the first stage of a US$20 billion liquefied natural gas project in Queensland state. The so-called Aussie, the world's fifth-most traded currency, has risen 22 percent against the US dollar in the past 12 months as the mining boom drove unemployment below 5 percent.
The RBA will keep its overnight cash rate target unchanged at 4.75 percent when it meets tomorrow, according to 21 of 25 economists surveyed by Bloomberg News last Friday. The nation's benchmark rate is the highest among the world's developed economies.
The Australian dollar traded as high as US$1.1081 last week, the highest since the end of exchange controls in 1983, after a government report showed second-quarter consumer prices rose more than forecast.
Consumer sentiment this month fell by the most since Lehman Brothers Holdings Inc collapsed in 2008.
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