"I got chills, they're multiplying..." - Grease
The Australian dollar is down! Repeat, the Australian dollar is down! At the time of writing, Australia's legal tender is trading 5.8% lower against the US this year to date; 3.2% cheaper against the euro; down 6.4% versus the yen; 3.5% down on the British pound; and, 3.4% lower even against the depreciated Chinese yuan.
The corresponding AUD stats from its 2018 high: It's down against the greenback (-9%); euro (-4%); yen (-7.3%); pound (-4.1%); yuan (-4.5%).
And why? It's because of the escalating global war on trade; it's because of falling commodity prices; it's because of widening interest rate premiums (in the case against the US) and narrowing interest rates differentials - the ECB, BOJ and BOE are expected to normalise interest rates while the RBA continues to sit on current interest rate settings for a long, long while.
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Another way of looking at this is, the AUD is doing what the RBA should be doing, cutting interest rates to support the domestic economy that's being buffeted by worries galore, directly opposite to what its shadow (or more accurately, some members of the shadow RBA Board) proposes - a rate hike.
But I guess this is the lesser of two evils. A rate reduction would re-ignite the fire of already high household debt levels - the latest stats from the Australian Bureau of Statistics (ABS) show that household debt to disposable income increased to 190.1% in the first quarter of 2018, a new record high from 188.7% in the previous quarter.
Recent history shows the effectiveness of the AUD depreciation in shielding the domestic economy from worries galore.
The AUD/US sank from US$0.80 to below US$60 during the Asian financial crisis; it fell from around US$0.65 to US$0.49 during the US recession in 2001 and following the September 11 attacks of the same year; and, it dropped from US$0.91 to US$0.62 at the onset of the GFC - when most major economies went into a Great Recession but Australia didn't.
As any currency warrior would tell you, this is good for the domestic economy. Australian exporters would find their wares more competitive in the world market (even with higher tariffs). Not only that, exporters would receive an extra boost from their US dollar - or euro or yen or pound or yuan) earnings when they're translated back into Australian dollars.
Wait there's more! Australian import-competing industries would also get a bump up as products sourced overseas become more expensive in AUD-terms, encouraging consumers to buy local produce.
There goes our overseas holiday trekking, but as long as it helps our fellow-Australians, she's right mate. Besides we still get to rub shoulders with offshore people as the cheap dollar-A prompts them to holiday in Aussieland instead.
Wait some more, there's one more. The cheap Australian dollar also makes Australian assets - stock market cough, cough - more attractive to foreign eyes.
Ben Ong is the Director of Economics and Investments at Rainmaker Group. He previously worked as a fund manager, economist, asset allocation strategist, portfolio analyst and stock market analyst. Check out his economics analysis here.