australian dollar

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The Fall of the Australian Dollar

Underperforming growth in China, improving economic conditions in the US, and the RBA’s recently announced cut in the cash rate to a record low of 2.75% have forced downward pressure on the Australian dollar – culminating in a loss of nearly 8% in value against the USD since mid-April. Crashing from its peak of $US1.10 in July 2011, the AUD has reached an 11 month low, with many analysts warning investors to brace themselves for further deterioration.

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Car Subsidies Delaying the Inevitable

The Federal government announced recently that they will continue to support the Australian car industry through ‘co-investment’ – i.e. through tax-payer funded direct subsidies to industry. This is funneling money to multinational co-operations so they can maintain production of Holdens and Fords in Australia. All this is for one reason – to protect Australian car manufacturing jobs.

The government argues that this investment is important to maintain a car manufacturing industry in Australia, and if there no support, they would cease producing locally-made cars. For example, the government granted $34 million in subsidies to the Ford Plant in Melbourne to keep it running until 2016. Decisions such as this have been branded as important to Australia’s ‘national interest’, a clever political line to justify protectionist policy initiatives.

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