Aussie dollar to hit $0.47 US cents:

Posted by George Mihos
November 27, 2008

The Australian dollar will hit an all-time low of $0.47 US cents by the middle of next year, a major French bank says.

Meanwhile, several economists are expecting official interest rates to fall to the lowest levels in almost half a century as Australia faces the biggest global economic turmoil since the end of World War II.BNP Paribas says the domestic currency will plunge, from its present level of $0.65 US cents, by the June quarter of 2009, as the economies of

Australia’s major trading partners softened.

“The slowdown in the economies of Australia’s main trading partners, particularly in

Asia, implies that export demand will soften,” the bank said in a global outlook report for December 2008.

“Nonetheless, net exports are likely to receive some benefit from the plunge in the Australian dollar exchange rate.”The Australian dollar fell to an all-time low of $0.4778 US cents in April 2001 in the wake of the tech wreck.A tumble to $0.47 US cents would represent a $0.52 per cent dive since mid July when the Australian dollar reached a 25-year high of $0.9849 US cents.

The Australian dollar fell to a five and a half year low of $0.6012 US cents in late October.BNP Paribas also expects an Australian economic growth rate of close to zero in 2009, but says the economy is likely to avoid recession as the Reserve Bank of Australia (RBA) cut interest rates aggressively.

“However, with aggressive fiscal and monetary policy easing,

Australia is likely to be spared from recession,” the bank said.Debt futures markets expect the overnight cash rate, now at 5.25 per cent, to fall to 2.75 per cent by April, the lowest level in almost half a century.Interest rates were 2.89 per cent in January 1960, according to RBA data of monthly average movements.

AMP Capital Investors chief economist Shane Oliver says the cash rate will fall to three per cent by June 2009, as the RBA grapples with the worst global economic crisis since the end of World War II.

“The RBA will want to get rates down rapidly, taking them to levels not seen since the 1960s,” he said, adding

Australia was likely to enter a recession in the second half of 2009.

“The economic threat to Australian growth from the global slump is the biggest seen in the post-war era.“We have a situation in the advanced world where all three major economies - Europe, Japan and the

US - will be in recession next year.

“An economist with financial markets research group 4CAST, Mick Turner, was even more bullish, forecasting a 2.5 per cent cash rate by the middle of next year.“There’s going to be a fairly prolonged period of balance sheet consolidation with households: you’re going to get a situation, even though credit is cheaper, people won’t use extra income to spend,” he said.

A “nasty” decline in

Australia’s terms of trade, the ratio of export to import prices, will also lead to dampened income growth, Mr Turner said.

source ninemsn money 25/11/2008   Yours with Ethics and Passion George Mihos

Melbourne Australia, November 27, 2008 

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