The Reserve Bank of Australia (RBA) said that a weakening currency is assisting a transition away from mining investment, while adding that accommodative policy remains appropriate to support growth.
“Economic activity had generally been more positive over recent months,” the Australian central bank said yesterday in minutes of its Aug. 4 meeting, when interest rates were left at a record-low 2 percent. “The further depreciation of the Australian dollar was expected to impart stimulus to the economy through stronger net exports.”
Policymakers are gaining a degree of confidence that post-mining boom growth is gaining traction, citing recent stronger data including hiring. The RBA is also relying on its US counterpart to raise rates later this year, which could spur a further reduction in a local currency that has already dropped 8 percent in the past three months.
“There was likely to be a sizable market impact notwithstanding how well telegraphed the change in policy had been,” the RBA said of an expected US Federal Reserve move. “It was likely that financial market volatility would increase and the US dollar could appreciate further, including against the Australian dollar.”
The RBA was a little more positive on key trading partner China, saying risks to growth in the world’s second-largest economy had “receded somewhat.”
Still, the central bank said the Beijing government’s “policy response to the recent volatility in Chinese equity markets had clouded the medium-term economic outlook.”
RBA Governor Glenn Stevens and his board have held rates for the past three months and signaled reluctance to cut further as house prices inflate in Sydney and Melbourne. The bank said recent responses by lenders to measures imposed by the banking regulator that targeted property investors “would be expected to reduce the risks relating to the housing market.”
Even so, Stevens is still waiting for an improvement in business confidence as a precursor to higher investment by firms. Sentiment has been more positive, aided by tax cuts in the May budget, yet hurdles remain. Businesses plan to cut investment in the next 12 months by the most on record, wage growth is at levels unseen since the early 1990s recession and the economy has grown below its 3.3 percent average for six of the past seven years.
“There remained considerable uncertainty around the timing and strength of the recovery in non-mining business investment,” according to the minutes. “The period of significant structural change for the Australian economy associated with the winding down of the mining investment boom would continue for some time.”
EXTRATERRITORIAL REACH: China extended its legal jurisdiction to ban some dual-use goods of Chinese origin from being sold to the US, even by third countries Beijing has set out to extend its domestic laws across international borders with a ban on selling some goods to the US that applies to companies both inside and outside China. The new export control rules are China’s first attempt to replicate the extraterritorial reach of US and European sanctions by covering Chinese products or goods with Chinese parts in them. In an announcement this week, China declared it is banning the sale of dual-use items to the US military and also the export to the US of materials such as gallium and germanium. Companies and people overseas would be subject to
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) founder Morris Chang (張忠謀) yesterday said that Intel Corp would find itself in the same predicament as it did four years ago if its board does not come up with a core business strategy. Chang made the remarks in response to reporters’ questions about the ailing US chipmaker, once an archrival of TSMC, during a news conference in Taipei for the launch of the second volume of his autobiography. Intel unexpectedly announced the immediate retirement of former chief executive officer Pat Gelsinger last week, ending his nearly four-year tenure and ending his attempts to revive the
WORLD DOMINATION: TSMC’s lead over second-placed Samsung has grown as the latter faces increased Chinese competition and the end of clients’ product life cycles Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) retained the No. 1 title in the global pure-play wafer foundry business in the third quarter of this year, seeing its market share growing to 64.9 percent to leave South Korea’s Samsung Electronics Co, the No. 2 supplier, further behind, Taipei-based TrendForce Corp (集邦科技) said in a report. TSMC posted US$23.53 billion in sales in the July-September period, up 13.0 percent from a quarter earlier, which boosted its market share to 64.9 percent, up from 62.3 percent in the second quarter, the report issued on Monday last week showed. TSMC benefited from the debut of flagship
TENSE TIMES: Formosa Plastics sees uncertainty surrounding the incoming Trump administration in the US, geopolitical tensions and China’s faltering economy Formosa Plastics Group (台塑集團), Taiwan’s largest industrial conglomerate, yesterday posted overall revenue of NT$118.61 billion (US$3.66 billion) for last month, marking a 7.2 percent rise from October, but a 2.5 percent fall from one year earlier. The group has mixed views about its business outlook for the current quarter and beyond, as uncertainty builds over the US power transition and geopolitical tensions. Formosa Plastics Corp (台灣塑膠), a vertically integrated supplier of plastic resins and petrochemicals, reported a monthly uptick of 15.3 percent in its revenue to NT$18.15 billion, as Typhoon Kong-rey postponed partial shipments slated for October and last month, it said. The
RSS