Home > Current Affairs, Politics - Domestic, Politics - International, The EYE-BALL FMZ - [Financial Markets Zone ], The EYE-BALL GURU > EYE-BALL’s Guru on – The Wayne Swan 2013-14 Federal Budget – Special EYE-BALL Guru Report – The Economic Triggers Part 2.4 –
  1. May 30, 2013 at 1:38 am

    The recent depreciation in the currency ($1.05 down to 96c ish) will have a lagged effect on inflation. Does this mean the RBA will increase interest rates when Sept Qtr CPI is imminent. It is a crutch. Abiding by their charter is just too hard, for a bunch of mindless Nevilles. From the earlier article numbered 2.2 Treasury always estimate inflation at 2.5% in forward estimates. They might trend it slightly in mid year updates as ABS info is available.

    The currency weakness will bottom out at about 93c. It will then start to climb to the 98c region where it should do some serious work. Next week’s RBA board meeting is critical. If there were to cut to 2.5%, the currency might well spike down to touch on 91c. Some economists believe the consequence of Ben Bernanke’s testimony last week is that the AUD will revert to 80c and there will be a sustained pick up in Aussie manufacturing competitiveness. Bunkum!

    Currency stability! We have exported those jobs. Increase the CPI target band to allow up to 5% maybe even 7%. Japan is talking hyper inflation, to kick start their nominal GDP. If Japan is moderately successful, Europe will follow. How does that leave us? That is months away, more likely 2014.

    A change in government in Sept must be considered. Will a coalition victory have a stabilising to bullish outcome on AUD asset classes? Our property market is already far too high. Buying a 5% gross yield investment property is just not available. In Europe it is easy. In Britain’s midlands you can buy a 7% gross yield. The PE on CBA could see AORD at 4500 before election day. This benign inflation outlook will start to bite when unemployment approaches 6%. There are so many things to do, and addressing funding of the major parties is hardly what we should be talking about. Meanwhile Rome is burning.

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