The Reserve Bank's mission to bring inflation down to its target range of between 2 and 3 per cent appears to be on track, but how confident of this can we be? Movements in the Australian dollar give us some clues, writes David Taylor.
Depending on which economist you speak to, that's roughly 140,000 jobs lost over the next 24 months.
This also creates another problem: an increase in business insolvencies, which leads to further redundancies.The Australian dollar saw out July at above 67 US cents. This week it's fallen to as low as 65.2 US cents.Part of the reason for this is that the 10-year US Treasury bond yield hit its highest point in 2023.The US Treasury Department announced this week it plans to sell $US103 billion of long-term debt next week.As bonds are sold, their prices fall and interest rates rise.
That slower world growth would also lessen the chance of any further interest rate hikes because it would subdue Australian economic growth.Meanwhile, former Treasury economist Warren Hogan noted that the view on the direction of Australia's monetary policy had changed "substantially" this week. "Given this is [1.4 per cent] below the US Federal Funds Rate, the currency will remain under pressure and could fall substantially if commodity prices start to fall."
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