The Australian Dollar has been on a downward spiral since a round of disappointing job figures hit the market, hitting a fresh decade low in yesterday’s trading session and expectations are beginning to grow the Reserve Bank of Australia will need to further reduce interest rates to tackle the issues facing the Australian economy.
The unemployment rate jumped from 5.1 per cent to 5.3 per cent, despite the number of job’s created increasing and although this is not a show stopper for the RBA to cut rates, any further movements in the jobless rate may force them to act.
"The RBA did indicate the unemployment rate would need to deteriorate 'materially' for it to cut. The next employment report is on March 19 and an unemployment number closer to 5.5 per cent would fit the bill for the RBA to possibly cut in April," said TD Securities analyst Prashant Newnaha
"A 5.5 per cent unemployment rate for the next employment report cannot be ruled out. If the coronavirus leads to job shedding and the participation rate remains unchanged at 66.1 per cent or increases, then the unemployment rate could head above 5.5 per cent” he added.
The Australian dollars coronavirus problems are being compounded by the current interest rate levels in Australia which are currently at record lows which is causing traders to sell the Aussie dollar in favour of higher yielding currencies. This is a far cry from the earlier situation when traders used to borrow yen at near-zero interest rates to buy the Aussie dollar when interest rates in Australia were more than 4 percent
The government has also weighed in on the situation with Treasurer Josh Frydenberg noting that the economic impact of the coronavirus outbreak will be larger than Australia's recent bushfire season which claimed the lives of 34 people and wreaked havoc on the Australian countryside
"The impact will be more significant than the bushfires, and it plays out more broadly across the Australian economy. Here in Australia, the economic impacts have been significant, as the Prime Minister referred to, not just the tourism and education sectors, which together contribute around $16 billion to the Australian economy, but also agriculture, and the destruction to end-to-end supply chains." Mr Frydenberg said.
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