Honestly, these people need a new job, from the AFR:
AMP Capital chief economist Shane Oliver said following any major currency adjustment, the initial effects are negative, but that “eventually you get a positive effect coming through – it just depends on your starting point”.
St George chief economist Hans Kunnen agreed the benefits from the currency devaluation, along with other stimulatory measures such as rate cuts, would flow through to Australia in the medium term.
China will have to pay more for its imports, but an increase in their now more competitive exports would help stimulate the world’s second largest economy, Mr Kunnen said.
The short-term pain would be felt in Australia’s manufacturing sector, which faced more intense competition from now cheaper Chinese-made goods, and exports, which would become less desirable as they become more expensive.
This is the diametric opposite of the outcome with some short term benefits and longer term pain. Assuming the devaluation continues, short term Australia will see offshore property demand rise but decline in the long (all things equal).
Also long term, the impacts are all bad as Chinese manufactures and commodity production gets cheaper versus imports. China is the world’s largest miner of coal and iron ore. Last time I looked Australian exports to China of those two commodities mattered.
What could be of benefit is if Australian companies planned to invest in China and recycle the profits. But we don’t do that, period.
Basically, Shane, it’s a good principle to work with that when economies with which we compete get more competitive than we don’t benefit.
