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Livas1
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  • 6 months later...
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I don't believe the RBA has a reason to make any changes this month.

Before the elections, one more cut MAY be made, possibly even two; but if so, I consider it most likely they'll cut in July, purportedly to offset the family tax cuts that won't now be forthcoming.

 

Just my tuppence worth of opinion.

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I am betting on a rate cut. Not because we need one, or rates are too high to promote stimulus, but purely to drive the AUD down.

So many problems for Aus are caused by the high dollar, that I am betting they will cut just to bring it down.

Of course, a lower dollar creates other problems - higher import prices, costlier foreign currency denominated loans etc etc.

But at this stage, I suspect the good bits might outweigh the bad.

This is purely a guess from this "eggspurt".

And if I am right, please don't tell me I am a genius. There is after all, a 50% chance of fluking a two horse race.

 

Mick

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Yeah I got the result right, but my reasoning as to why may well be wide of the mark. As I said, when there is only three outcomes, and one of those outcomes is an extremely long shot, you can fluke it.

 

Mick (basking in the glow of unearned glory).

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  • 2 years later...

Australia as China's Canary Means World Watching RBA's Heartbeat

 

Any investors wanting to gauge the severity of the global fallout from China's economic downturn could do worse than listen to what Australia's central bank says Tuesday.

 

The Reserve Bank of Australia manages the developed world's most exposed economy to China and until now signaled stock market volatility there wouldn't hurt Chinese consumption. While traders and economists predict Governor Glenn Stevens will keep interest rates unchanged at a record-low 2 percent tomorrow, wagers on a cut by December jumped to 65 percent Monday, from about 35 percent before China devalued the yuan Aug. 11.

 

"Of most interest will be any comments regarding recent financial market turbulence in relation to China and emerging-market driven worries and in particular whether this suggests a strengthened easing bias," said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd. "My view remains that the probabilities are skewed towards the RBA having to cut rates again at some point."

 

The stock market rout in China threatens not only Australian exports but also a fresh slump in confidence among consumers and businesses Down Under.

 

Company profits fell in the second quarter for the fifth time in a row, the longest stretch of declines for at least two decades, according to data released Monday by the Australian Bureau of Statistics. Firms are forecasting a 23 percent drop in investment in the fiscal year that began July 1, little changed from the 25 percent reduction they estimated three months ago, a government report last Thursday showed.

 

The central bank is unlikely to be much moved by the business spending data, having earlier this month predicted that investment outside the mining sector would likely remain subdued for some time; it's also flagged that the country's potential growth rate may have fallen from above 3 percent.....

... more ... & with pretty graphs

 

http://www.bloomberg.com/news/articles/201...g-rba-heartbeat

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Well, Glen kept the rates right where they have been or the last four months.

 

From ABC News

The central bank has not been swayed by recent global market volatility, holding to its stance of further monitoring the Australian economy before deciding its next move.

 

"Equity markets have been considerably more volatile of late, associated with developments in China, though other financial markets have been relatively stable," RBA governor Glenn Stevens said in a prepared statement.

 

Mr Stevens said the economy should continue its modest expansion.

 

"While growth has been somewhat below longer-term averages for some time, it has been accompanied with somewhat stronger growth of employment and a steady rate of unemployment over the past year," he said.

 

The RBA appears to be becoming more sanguine about exchange rates, noting: "The Australian dollar is adjusting to the significant declines in key commodity prices."

 

After the announcement the Australian dollar remained largely unmoved, trading at 0.7145 cent against the US dollar.

 

The bets on an interest rate decrease for next month however, are starting to be put on.

 

More data increasingly suggesting a slowing Chinese economy will put pressure on the AUD.

Most recent results on Chinese manufacturing show a further slowdown.

 

The official Purchasing Managers' Index (PMI) slipped to 49.7 from last month's reading of 50.

 

A figure below 50 indicates activity is contracting.

 

The figure from China's National Bureau of Statistics is the bellwether for large industrial enterprises, and follows an even weaker reading from the private Caixin "flash" PMI last month which lead to a savage sell of shares in Chinese and global markets.

 

The Shanghai composite index slide on the news and at 1:00pm (AEDT) was down 2 per cent.

 

ANZ's chief China economist Li-Gang Liu said he now expected third quarter GDP figures would show economic growth had slowed to 6.4 per cent, well below the official 7 per cent target.

 

"New orders and new export orders indices both declined 0.2 percentage points to 49.7 and 47.7, respectively, suggesting that both domestic and external demand remains weak," Dr Liu said.

Slowing China

 

Mick

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