Q WHAT IS THE OUTLOOK FOR THE $A AND WHAT WILL IT MEAN FOR INVESTORS?
2019 is likely to see more downside in the Australian dollar. A tight US economy is likely to see the Fed raise interest rates a few more times, whereas our Reserve Bank is likely to leave rates on hold, making it relatively less attractive for global investors to park their cash in Australia.
Softish commodity prices and housing market uncertainties are also likely to weigh. The weakness in the Aussie dollar will probably be confined to the $US0.60s.
For us as consumers, a lower $A is bad news as it directly adds to the cost of overseas holidays and petrol and can put upwards pressure on retail prices.
For us as investors, it’s mostly good news. First, it makes the economy more competitive and so helps listed Australian companies. Second, those Australian companies that have overseas operations will see a boost to their offshore earnings.
Finally, the value of investments Australians have overseas go up as the $A goes down, provided those investments are not hedged back to Australian dollars.
head of investment strategy and chief economist, AMP Capital