RBA rate cut pressure mounts as Australian dollar surges on US debt woes
Australia's dollar hit an eight month high against the US dollar on the back of greenback having its worst start to a year since 1973.
A host of economic policies, which is adding to a budget deficit already running at 7 per cent of GDP, has investors in the US dollar fearing it will be unable to pay its money back.
Webull securities Australia chief executive Rob Talevski said the RBA will be closely watching the fallout from the latest Trump development.
'We have a couple of storm fronts coming out of the US in the scene of the big beautiful bill but also a depreciating US dollar and questions of the independence of the Fed.
'This obviously has ramifications for the rest of the world and one the RBA will be taking note of.
'Ultimately, the RBA will be cautious, but for the short-term there's plenty of reasons for the RBA to cut in July,' he said.
DRAG ON THE AUSSIE ECONOMY
While a rising Aussie dollar against the US is good for travellers and those buying from overseas, it could have a massive impact on the Australian economy.
Australia's three major sectors are raw materials exports, tourism and international education at universities which all come under pressure with a rising Australian dollar.
While conceding a couple of rate cuts won't alone solve Australia's economic problems, Mr Taleski says it adds to a chance of a rate cut
'Obviously the Australian dollar is a commodity dollar and that is the sector that will be impacted.
'We've already seen a slowdown in tourism and international education with a strengthening Aussie dollar likely to harm us.
'It is definitely something the RBA will be monitoring closely.
According to Mr Talevski combined the falls in mining revenues, tourism and education will see the Australian economy stall over the next 12-months.
He also opines this adds more pressure on the RBA which would be wise to consider the mounting risk that a falling US-dollar has on the global economy.
'Brand USA has been an impeccable defence in the face of mounting economic challenges in recent decades – sustaining global investor trust throughout the massive post-GFC monetary expansion and a deteriorating fiscal trajectory is not a luxury that would be afforded to any other country on earth,' he said.
Mr Talevski said the RBA acting a bit quicker and cutting rates in July could help with some of the pain from a higher Australian dollar.
'If we look back and analyse the RBA historically, the main criticism is that they are very slow to react whether it is increasing or decreasing monetary policy.'
'Information flows really quickly whether it is good or bad so reactions from that need to be a lot quicker than we've seen the RBA perform.
BIG BEAUTIFUL BILL
The latest storm facing the US dollar US President Donald Trump's passing his signature bill through the US House of Representatives by four votes on Friday overnight.
Dubbed the 'big beautiful bill' will do a host of things including fund a crackdown on immigration, pass his 2017 tax cuts, no more taxes on tips, cut credits or clean energy and EVs, state and local tax deductions as well as cut social safety net programs.
Republicans said the legislation would lower taxes for Americans across the income spectrum and will help spur on economic growth.
Critics say it gives the top 1 per cent of US households with incomes of more than $917,000 will get a $66,000 tax cut or about 2.4 per cent of their income.
Going along with the bill will be cut to medicaid and food stamps meant for lower income earners.
Overall the tax cuts will add $US3.4 trillion to the national debt between 2025 to 2034, adding to the US current $36.2 trillion national debt according to the nonpartisan Congressional Budget Office.
Mr Trump cheered the passing of the big beautiful bill on Truth Social.
'One of the most consequential Bills ever. The USA is the 'HOTTEST' Country in the World, by far!!!' Mr Trump wrote.
AMP chief economist Shane Oliver said the economic impact of this bill will be ambiguous.
'On the one hand the tax cuts likely provide a supply side boost to the economy, partly offsetting the negative supply side impact of the tariffs,' he wrote in his economic note.
'It may provide some near-term stimulus via the front loading of tax cuts but again this is at least partly offset by the tariffs.
'And with the income tax cuts being skewed to the rich (who don't change their spending much) and the spending cuts skewed to low-income earners it may mean that it could act as a drag on growth.'
But over the longer-term Dr Oliver conceded it will add further pressure on the federal debt levels.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
News.com.au
2 hours ago
- News.com.au
How two brothers turned a phone case into a $100M fashion empire
It started with a single phone case produced by two dentists. Now it is one of the world's fastest-growing luxury brands. Australian brothers Omar and Zane Sabré's 'side hustle' has evolved into Maison de Sabré, a homegrown luxury leather house now standing shoulder to shoulder with the world's most elite fashion brands. 'We're literally just two guys that started just thinking that they could do something. And then really actually followed through and did it … it's phenomenal,' Omar said. 'We really wake up every morning and just sort of pinch ourselves and be like, this is insane, you know?' Walking away from careers as dentists, the brothers credit their rise to an unwavering commitment to craftsmanship, from their very first meticulously designed phone case to today's collection of refined luxury bags. 'We were there to sort of shake luxury up and give it a new definition,' Omar said. What started as a direct-to-consumer business has grown into a full-scale luxury house, now sold in over 150 countries and stocked by retailers such as Nordstrom, Saks Fifth Ave, and Bloomingdale's – with revenue set to surpass $100 million for the first time in 2025. Launched during Zane's time at dental school, the brothers poured everything into their 'side hustle' and by the time Zane graduated, the brand had become their full-time focus. 'By the time I graduated, we made the decision to go full-time in the business and leave our dental careers behind us, which was back in between 2017 and 2018,' Zane said. 'From there, we only had one core product, which was this phone case, it was quite a meticulous phone case, we used … some of the best materials and the best craft.' In just eight years, the duo has turned their vision into one of Australia's most prominent fashion exports, proudly redefining what Australian luxury looks like on the global stage. 'We're able to export Australian creativity onto the world stage and I think that's something that's been really rare,' Omar said. 'It's something that we really take a lot of pride in … because when people hear about Australian leather goods, it's typically the first time they've ever heard that phrase.' The bond between the brothers has been a quiet superpower behind the business – helping them scale fast without losing the trust, chemistry, and aligned purpose that comes from family. For Zane, working with his brother is the 'best thing in the world'. 'There is nobody else you typically really want to do it with other than your own blood, someone you've grown up with and have been joined at the hip ever since you were kids, 'On paper, it makes the most sense; in reality, it makes even more sense.' Described as a quiet luxury 'disrupter', Maison de Sabré is set to become the first Australian brand to launch a multi-venue retail activation across Saint Tropez, Mallorca, and Cannes, a space long reserved for heritage fashion houses. 'I think we're on to something truly special,' Zane said. 'We're excited to represent a brand from Australia as two guys that really knew nothing about business or entrepreneurship or luxury or fashion eight, nine years ago, now being able to sit alongside some of the best in the world.'
News.com.au
3 hours ago
- News.com.au
Couple who queued for eight days to buy Melbourne land sell up
A couple who lined up for eight days to secure their dream plot of land in Altona Meadows are all smiles after selling up four decades later. Saturday's auction of 8 Weeroona Tce was a family affair with their now-grown up daughter, Ray White Williamstown director Joanne Royston, acting as the listing agent for her childhood home. Ms Royston was aged 13 years old when her parents Loretta and David bought the block where they built a four-bedroom home. She recalled her mum and dad enlisting her grandmother Nesta and their friends to help take turns while lining up for the land, in 1984. 'They slept in cars and had chairs to hold their place in the queue,' Ms Royston said. Her parents were keen on the block because it backs onto a park. Saturday's auction saw four bidders compete for the abode. The house sold for $906,000, a sum slightly higher than the $800,000-$880,000 asking range. 'A young family bought the house, they love the location,' Ms Royston said. 'A gate opens from the property to the park where there's a soccer club, netball and basketball courts, flora and fauna walks and a BMX track.' Her treasured family memories include walking in the park with her parents and younger brother, Travis, who now works with her at Ray White – while the auctioneer was fellow agency director Dean Stanley. 'We were both born a day apart at Footscray Hospital and our mothers are very close friends,' Ms Royston said. She said that her parents were planning on moving into a retirement village unit, where her father was looking forward to having a much smaller garden. And a first-home buyer family has an extra reason to enjoy their interstate holiday after scoring a Caroline Springs house for $920,000 on Saturday. The four-bedroom home at 14 Caddick Gardens was listed with a $700,000-$750,000 range but soared above price hopes thanks to five keen bidders who participated in the auction. Calder Real Estate Agents Delahey's Mo Safatli said that a couple with two primary-school aged children claimed the keys, just before they were due to fly to Queensland for some time off. 'They did say to me that it would be extra special if they bought the house,' Mr Safatli said The wife was too nervous to attend the auction so she waited around the corner while she husband did the bidding. About 50 people, consisting of 19 buyer groups and their friends and relatives, attended the pre-auction inspection. A $700,000 bid kicked off the main event, conducted by auctioneer Andy Reid. The auction lasted for eight to 10 minutes and bids came in so quickly that Mr Safatli only had a chance to consult with the owners around the $870,000 mark to confirm that the property was on the market. The vendors, who had kept the house as an investment property for the past 15 years or so, had repainted and installed new carpets prior to putting the home on the market. Mr Safatli said that some houses in his region of Melbourne's western suburbs did surpass their listed ranges by hundreds of thousands at auctions, once in a while. 'It does happen sometimes, I think with this one the fact that it was presented immaculately made all the difference,' he said. And he has noticed buyers becoming more competitive since the Reserve Bank lowered Australia's cash rate in February and May, which widely led to lowered interstate rates. 'The mindset is of them buying today before it (prices) go up tomorrow,' Mr Safatli said.
Perth Now
3 hours ago
- Perth Now
Pacific-Aust 'commonality' important in uncertain times
Anthony Albanese has hailed the importance of personal relationships with Pacific nations at a time when other powers are seeking to increase their influence. The prime minister, who will host Fijian counterpart Sitiveni Rabuka when the Wallabies take on Fiji in their one-off Rugby Union Test in Newcastle on Sunday, reiterated the importance of soft diplomacy in the region. "Relationships between nations essentially come down to relationships between people," he told ABC Radio on Saturday. "It is a great way in which our nations can show our commonality. We are all members of the Pacific family." Australia has provided $10 million over seven years for the Fijian Drua women's and men's teams in the Super Rugby Pacific and Australia Super W competitions. Some $600 million over a decade for a PNG NRL team had also cemented the relationship between the two neighbouring nations, Mr Albanese said. He said investments in sports were linked with education and economic development, resulting in better health outcomes and stronger, more secure and smarter Pacific populations. At a time when the United States is pulling away and China and Russia are trying to increase their influence, the prime minister stressed the importance of positioning Australia as the partner of choice. "We have a considerable defence and security presence throughout the Pacific and that's very much, in these uncertain times, in Australia's interests," he said. "One of the ways that we cement that is through those personal relations." Mr Albanese was keen to highlight Australia's upgraded defence and security relationships with Fiji, PNG, Tuvalu, Nauru and other smaller nations in the Pacific. "We are family and we assist each other as friends, not with strings attached," he said. "What we do is we help each other out because of our common interests and our common values." Mr Rabuka met with Governor-General Sam Mostyn at Government House in Canberra earlier this week. In a keynote address at the National Press Club on Wednesday, he spoke glowingly of bilateral ties between Suva and Canberra in a deteriorating world. "Unfortunately for now, I contest the region's outlook is more uncertain than at any time since Fiji's independence in 1970," he said. "Perhaps we have reached a point in our Fiji-Australia relationship where a renewed and elevated Vuvale partnership needs a further step-up to an agreement for a treaty."
