Asian dilemma bites into Australia
Asian dilemma bites into Australia
SYDNEY (AFP): Australia's economy trembled in the face of Asia's entrenched economic crisis yesterday as the tourism and education sectors weakened alarmingly and the dollar was tipped to plunge to a 10-year low.
"The Aussie dollar has fallen by so much so quickly... it wasn't obvious where it would stop," said Bankers Trust senior economist Peter Munckton.
Dire predictions of a dive to 57 US cents by Christmas looked "a little strange" Wednesday, he said, as the dollar rebounded to 65.75 U.S. cents in late trade after dropping to 64 U.S. cents and a four-year low earlier.
But such a move was still possible, he said, if any more extremely bad news rolled out of the regional economies.
Brokers reported a complete lack of buying support for the Aussie this week as investors departed, spooked by the Asian crisis as well as a lower gold price and fears of a current account deficit blow-out.
The local currency has already lost more than nine U.S. cents since the beginning of October.
"It is a perilous task to forecast how far the (Aussie) dollar will fall," ABN Amro chief economist Peter Clay told The Australian newspaper as the currency's woes once again made front-page news here.
One of the most pessimistic forecasts was issued by the National Institute of Economic and Industry Research, which last month tipped that the dollar would bottom out at 60 U.S. cents.
But analysts agreed that short-term forecasts were useless while investors ignored strong domestic economic fundamentals amid fears that a slowdown in Asian growth would cut Australia's export growth.
Australia's tourism and education industries are the first victims of the continuing crisis, as the dollar strengthens against its regional counterparts and prices Australia out as a destination for Asian tourists.
Worst-case scenario predictions for the A$16 billion (US$10.4 billion) industry, which draws half its business from Asia, have become reality much sooner than expected.