More on China’s devaluation and Australia from The Australian:
Maryland University finance professor Albert Kyle said the devaluation was part of a policy response to China’s weakening economic growth and stockmarket crash, and there could be more to come.
…“In this very short-term window it is probably increasing the demand for housing in Australia by Chinese investors temporarily,” he said. “But if you fast-forward to a year from now, if you didn’t get your money out of China today it is probably too late. In a year from now you are probably in such a belt-tightening mode and prices are so low in China that you probably can’t sell the assets in China to buy the Australian ones. So I would guess that the Australian housing market could be sitting on the edge of a cliff, with Chinese investors propping up the cliff in the very short run but in the long run, probably not.’’
…Rather than raising rates and attempting to defend the gold standard, as the US did in 1929 — actions that ushered in the Great Depression — the Chinese had devalued the currency to ease the market shock.
Profressor Kyle also sees a hit to Australian education exports and I will add, by extension, tourism.
All solid enough. I will also add that the Australian dollar is also going to fall against the US dollar, and probably just as fast over the stretch so that will temper the impact. But I agree it will still have material psychological impact on prospective Chinese buyers.
