From Bloomie:
“The lower dollar’s been helpful. I think that will continue to be useful for us and an even lower dollar even more useful,” he said. “A sufficient number of businesses have not yet been convinced that there are profitable opportunities to invest in a bigger way than they are now.”
“You can have quite a big impact on spending power with changes in rates,” Edwards said. “It’s helpful too in providing a little bit of pressure on the Australian dollar, which is a good thing, downward pressure.”
…“The real thing that is impacting us at the moment is the slowdown in residential construction,” he said of China. “There are some signs that that is beginning to turn around. I expect it will turnaround. It will have to turnaround otherwise China won’t be able to achieve its aims in respect of urbanization in the next decade or two.”
I’ve said it before and I’ll say it again, the RBA should muzzle John Edwards. It’s nothing personal but he has the force of a dandelion when discussing the currency.
It is even more disconcerting when he ignores basic economics to up-sell China. Urbanisation is past its halfway point. Once that peak is in, the rate of change in the consumption of the components of urbanisation important to Australia – steel, iron ore, coal etc – begins to fall.
It doesn’t matter if China builds a new Manhattan every year if that town is a little smaller than last year, it will detract from Chinese growth and put enormous downward pressure on commodity prices.
Sure, you can ship more dirt and win market share, but that is tantamount to taking a pay cut to do twice the work, hardly welfare enhancing.
It’s time Australia had a post-China conversation.
