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Australia: Dollar, Home Loans Plunge. Insolvencies Soar.

  • Written by Syndicated Publisher No Comments Comments
    June 12, 2013

    Curve Watchers Anonymous has its eye on the Australian dollar. As expected, it has taken a big dive in conjunction with a housing bust and a slowdown in China that impacts the demand for commodities.

    click on chart for sharper image

    The only thing surprising to me about this plunge is how long it took, but here we are.

    Aussie Falls to Lowest in More Than Two Years

    Bloomberg reports Aussie Falls to Lowest in More Than Two Years as Home Loans Slow

     Australia’s dollar fell to the lowest in more than two years versus the greenback after home-loan approvals grew at the slowest pace in three months, boosting the case for further cuts to borrowing costs.

    The Aussie slid against all but one of its 16 most-traded peers amid speculation the U.S. central bank will reduce stimulus this year, narrowing Australia’s interest-rate advantage. Standard & Poor’s lifted the U.S. credit outlook to stable from negative, supporting the view that the Federal Reserve could taper asset purchases under its program of quantitative easing. New Zealand’s kiwi dollar fell.

    “Housing is the one area most likely to make up for the mining investment downturn, and it’s disappointed,” said Joseph Capurso, a Sydney-based foreign-exchange strategist at Commonwealth Bank of Australia.

    Australian Insolvencies Hit Record 

    Why anyone would think housing would make up for a downturn in mining is certainly a mystery given Australian insolvencies hit record for month of April.

     A new April record has been set for Australian companies becoming insolvent. Some 941 firms were put under administration, marking the highest tally for that month since records were first made public in 1999.

    Some 941 firms were put under administration, according to an FTI Consulting analysis of Australian Securities and Investments Commission records.

    Almost 3450 companies have gone into administration so far this year, compared with 3524 during the same period in 2012.

    But the number is higher than the opening four months of 2008 to 2011, which included the global financial crisis.

    Worst Yet to Come

    For Australia, the worst is yet to come. Australia escaped a big economic bust in 2008 because of high demand for housing and commodity demand from China, but both sectors are in the tank now, and will stay there.

    China is slowing and will continue to slow, Australia labor costs are ridiculous, the Australian housing bubble has burst, and commercial real estate has only one way to go: down.

    Read more at http://globaleconomicanalysis.blogspot.com/2013/06/australian-dollar-plunges-as-home-loans.html#p2F4kbrqM5FMMEDi.99

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.