Q WHAT IS THE OUT­LOOK FOR THE $A AND WHAT WILL IT MEAN FOR IN­VESTORS?

Money Magazine Australia - - INVESTING OUTLOOK -

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.

Shane Oliver,

head of in­vest­ment strat­egy and chief economist, AMP Cap­i­tal

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