Now the Australian Dollar is hitting a very low point. The currency market says this is due to looming economic concerns and the realities of the recession facing this country. These issues will affect the Australian economy, although the real economic issues are still left to be addressed.
But as global financial woes hit Australia, the currency is taking a beating. Australian Dollar and the US Dollar are now being traded at close to parity. Many people are blaming the Government for this poor performance in the Australian Dollar.
It appears that there are many fundamental factors playing in the weak local currency. This problem will not go away in time. A declining Australian Dollar will only get worse until the downturn ends.
The most glaring weakness in the Australian economy is the currency’s depreciation against the US Dollar. It has been selling off lately to record lows. Here is why the Australian Dollar could continue to weaken:
A major decline in the value of the Australian Dollar against the US Dollar, means that the Gross Domestic Product (GDP) of the country is not as strong as it should be. Also, the country is investing a lot more in imports than it did before. That’s the reason why the deficit is widening at a faster rate. The corporate sector is seeing losses as well.
The Government is going to undertake some necessary reforms to handle the bad economic issues. These reforms include a big rise in taxes on the rich and on corporations. This will help the government bring about real change, which will help bring down the budget deficit, as well as the budget deficit to a lesser extent.
At the same time, the government is willing to give more funds to the banks. It is also willing to allow interest rates to rise to prevent the banks from shutting down. In the meantime, the Reserve Bank of Australia, will also have to reduce its base interest rate.
The government must address these issues with respect to the Australian Dollar, which will help pave the way for growth and recovery in the economy. In addition, it must also maintain fiscal spending targets as well as implementing structural reforms. These should be accompanied by strong macroeconomic policies, if the budget deficit is to be reduced.
The implementation of structural reforms should include allowing the retail banking sector to carry on business and to employ more people, who are in need of jobs. This would in turn attract more foreign investors, who would also pump in more capital into the country. This is good for the economy, because this means more employment opportunities.
The government’s job should also include creating a more stable economy, so that the investor and the consumer confidence will be assured. In addition, the need for monetary policy reform is also important, because this would allow the exchange rate to stabilize. For Australia, it is time to tackle the issues of the Australian Dollar, which is being battered.
To avoid the continued weakening of the Australian Dollar, the government has to learn how to manage and to improve the existing macroeconomic policies. There are certain structural reforms that must be implemented for the country to thrive and to find answers to its issues.
And this is only possible through certain reforms which would allow the Australian dollar to strengthen and stabilize. Only then will the economy find real solutions to the issues of the Australian Dollar.