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AUSTRALIA’S CENTRAL BANK has cut interest rates to record lows in a bid to kickstart the country’s economy as it continues to suffer the hangover from its mining boom.
The Reserve Bank of Australia (RBA) sliced its official lending rate to 2% today, the latest in a series of reductions that started in November 2011 – when rates were at 4.5%.
The country’s unemployment rate has been creeping up from a low of about 4% in 2008 to 6.2% in March as China’s appetite for commodities like iron ore – Australia’s biggest export – waned.
Australia had been one of the few major economies to emerge virtually unscathed during the financial crisis having recorded 23 straight years of GDP growth.
That economic strength worked to push up the value of the Australian dollar, most importantly against the greenback as US officials slashed interest rates and unleashed a money-creating quantitative easing programme to get the world’s biggest economy going.
But Australia has been struggling to maintain employment and wage growth since China’s unprecedented building binge came to an end.
High dollar woes
During the mining boom, the high Australian dollar hit the competitiveness of other industries like manufacturing hard as they battled to compete with cheap imports. The country’s car-making industry, for example, was pushed to extinction.
However since the RBA started cutting interest rates, the Australian dollar has lost about 20% of its value against the US dollar – a trend which the central bank hopes will continue.
Further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices,” RBA governor Glenn Stevens said today.
Meanwhile, growth in employment and consumer spending are expected to pick up, but both businesses and the government have been reluctant to open the purse strings – meaning the outlook for jobs was still hanging in the balance.
The economy is … likely to be operating with a degree of spare capacity for some time yet,” Stevens said.
- With AFP
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23 years of growth is a good run in fairness
Australia has had these swings and roundabouts before, stockmarket crashes and property bubbles. So I don’t see anything here long lasting to feel concerned about as long as the sun keeps shining.
Some signs here. People have been returning from Australia having not picked up work as easily as 3/ 4 years ago
yeah its been a massive struggle to find work, heading back to Ireland in a month as the Oz dream was not meant to be
There’s going to be a bad reaction to this… This generation of Australians have never seen anything but economic growth. There’s going to be a lot of extremist political figures and policies.
Pretty much like what happened here, bar the extremist poiticians…
drew, they already have a load of extremist political figures – The prime minister is a very strange critter, as are his cronies. They refuse to accept climate change, have very backward and inhumane policies on refugees, and relied far too much on coal and minerals to China when it was obvious that boom wouldnt last (and the list of the Abbott governments failures goes on)
If the current government was allowed to do what they wanted Australia would be almost a fascist state.
Yeah but no one listens to extremists when they are preoccupied working, holidaying and spending. They alway remain on the fringe…
Get ready for an out cry of blame it all on the immigrants, blame it all on the banking industry etc.
There’s no reason a resources driven export can’t last and prosper… It’s just dangerous. Put all your eggs in one basket and you’re very vulnerable.
Diversity in industry is good long term. Don’t want to be Detroit.
Backward & humane polices,
What like stopping the boats & not letting people drown at sea like the previous Gov.
& climate change my arse, climate changes daily .
Weather changes daily, climate does not.
Drew good point, if you are under 50 in Australia you have no idea what a recession or downtown turn is. You would have been still in school during the last one, all you know is decades of boom, more jobs than people to fill them, and job hopping chasing higher and higher salaries. However this is not a uniform downturn, some states such as VIC and NSW are still booming, while others such as TAS, SA and WA are flat, so there won’t be any long term issues this is just an adjustment.
Not only that but the typical Aussie 20 something in a major metropolitan area are heavily indebted having taken on massive personal debts in the form of leased cars and 3-4 credit cards a piece….
Consumer credit is going to be way more of an issue there than here… Theoretically if there was an Irish style credit crunch they would be hit with heavy mortgage and consumer debt.
I don’t see there being a housing decline in Oz though.
the bubble bursts
You know a bubble doesn’t always have to burst…. It can deflate too if the right policies are put in place.
Ah yes, the “soft landing” hypothesis.
Where have I heard that one before?…
Nothing has burst. Australia is still near the best in the world in nearly economic metric you care to mention. The rest of the world crashed and is now on an upward trend while Australia was relatively unscathed and is winding down from a mining boom which was always going to happen. If you just read headlines you’d think Ireland was booming and Australia in recession.
Interesting comments you’re responding to Guru…surreal how some people in Ireland think the housing market and the economy are the same thing, pure boganomics.
The Chinese bought the mines and closed them because of reduced demand for the ores.
They’ll reopen when demand returns and prices rise – but that does nothing for the Australian economy in the meantime.
What else has Australia got to offer?
Western Australia and parts Queensland where the only regions to benefit from the Mining boom, the other states received little or no direct benefit, or indirect benefit as mining was not taxed during the boom. To put that in perspective 80% of Australians are employed in occupations that have nothing to do with mining and the softness in the economy is from the high Australian dollar which has made exports more expensive.
What do you make of the house prices in and around Sydney,Boganity ?
That must be a worry,no?
Chinese economy has slowed down.
US economy is stalling also
Oggie I think Glen Stevens wishes he had the power to raise interest rates in Sydney, leave them unchanged is in Melbourne and lower them in the other six states and territories…but he can only adjust them for the entire country
Bubbles always burst
That is a stupid comment. The money from the mining boom funded the building of houses, it funded the foreign holidays, the fancy v8 ute, people had more money to eat out and generally just live lavish lifestyles, just because 80% of people don’t earn a living directly from the mines doesn’t mean they don’t indirectly benefit from a mining boom.
The mining boom occurred over 3,000 kilometres from the majority of the Australia’s population and there was no tax revenue from mining. So maybe you can explain how and where you believe the benefits flowed to the majority of the population not connected to mining?
its called macro-economics!
Funny that, i dont think queensland which you stated earlier as one of the hubs for the minning boom is 3000km from australia’s main population. A lot of the people working in the mines were flowing in from all over australia, o look there’s another spin off industry that benefited from the minning boom, the airline industry.
So all the profits went overseas, no taxes where paid on those profits and the workers where all FIFO yet somehow some undefined benefit trickled down to the majority of the population unconnected with mining activity. I’m still waiting for you to explain the mechanics of that ?
So when the fifo or dido worker go back to their home town/city they decide they want to build a house, does this not create employment for the builder? Is the builder working in the mines? No, but does he benifit from the minning, yes
Jealous of mr Joyce are you? Name calling that’s grooming up. Qantas posted some good results recently, largely thanks to the “tallagh knacker”
Growing up
I was in OZ for a holiday 3 year ago and was talking to an ozzy business man and he was laughing about our economy crash.. mouthing that it wouldnt ever happen there… I told him dont be so sure. I hope he was thinking of me when his business closed a couple of months ago
Be grand… Another can of fosters there please Alsa…
Iron ore mines might be slowing down but gas mines aren’t,there popping up like mushrooms theres alot of work left in austrailia yet…its a fairly self sufficient country its always going to have resources for exporting,not to mention all the infrastructure thats happening at the moment..if you cant get work in oz you cleary dont want to work…
Have freinds in oz who told me this was coming 2 years ago. Some of the natives have got very lax about their economy and buying up beach front property etc.
My thoughts exactly Brendan, Australia is looking for skilled labour not migrant labour.
They’re talking about giving out visas to people with lots of money now,boi -and not just the people with the skills .
CorkBoi That has always been in place.
Don’t think so mate , just smaller bubbles.
Can anyone suggest homecoming theme tunes?
Waltzing back to happiness?
Coming back to one of the highest taxed countries in Europe where we pay on average 30% more on groceries, cars etc. Property taxes,water rates,poor infrastructure,unreliable and expensive public transport etc, etc! !
Yes because there is no water or propriety taxes in Europe…….more like we have the cheapest in Europe.
So RonanM, do you work for Irish Water?
Two years back I told a couple of Australian colleagues the ‘Irish property story’ and warned them that the Chinese commodity buying frenzy had to cool soon and that a ‘soft landing’ to their overinflated property market where a house now costs twelve years income was as likely as the ‘soft landing’ we were told to expect here in Ireland, i.e. no chance.
For a moment I thought one was going to punch me, and the other appeared to consider me a nutcase if some kind for daring to state that “bricks and mortar may not be a great investment”.
Such is life.
The decline against the US dollar might not be sustained. The USD is slowly losing its status as a reserve currency with countries in the Middle East and Asia (Turkey, Iran, China and Russia spring to mind immediately) agreeing to trade in each others’ currencies.
Good time to buy property in Australia?
Their economy is going to crash and burn like everyone else’s their is no fool proof economic plan they if they start this asteroid mining it will finish them
Australias biggest banks shares lost $40 billion in value this week.
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