They’re back. This time a new crop of AFR journos:
Rising US interest rates fuelled by Donald Trump’s tax cuts stimulating the American economy could soon push the Australian dollar below US70¢ and gradually lift local inflation to help the Reserve Bank of Australia increase borrowing costs next year.
The Australian dollar dropped to a 2½ year low of US70.78¢ on Thursday as the 10-year US Treasury yield, a global interest rate benchmark, posted its biggest daily jump – 0.12 of a percentage point – since Mr Trump’s election win in November 2016.
A falling Australian dollar and higher oil prices may create a perfect storm to push local petrol prices above the $2 a litre mark, costing motorists and businesses, analysts said.
How is oil going to deliver Australian core inflation? We don’t make anything any more. LNG exports are irrelevant to wider income. There is no mechanism to push it through the production chain.
That is especially the case when aggregate demand is about to slump owing to the combined forces of the credit crunch, falling house prices, weakening consumption, construction downdraft and three east coast elections before May.
Tradable inflation in things that other nation’s make has done absolutely nothing to lift local prices all the way down from an AUD at $1.11:
It ain’t about to start now.
