Strong Aussie dollar is giving us problems

The Federal Treasurer, Wayne Swan, has announced a revised budget predicting Australia’s economic outcomes over the next three years.

The main concern facing the Federal Government is the high value of the Australian dollar which has drastically eaten into Government revenue causing a A$10billion short fall on predicted earnings.

Currently the Australian dollar has risen above parity against the US dollar and is impacting on exports and tourism.

The end result has caused the Treasury to rethink its budgetary forecast for the remainder of the 2010 -11 financial year and beyond to 2011-12 and 2012-13 with estimates for the forthcoming CPI index for the remainder of this year likely to reach 2.75% and grow further to 3.0% next fiscal year adding inflationary pressure on the Reserve Bank to lift interest rates still further in the new year.

In his announcement from Canberra Mr Swan has shaved A$3.1bn off the previous budgetary forecast with predictions of a deficit amounting to A$41.58bn in the 2010-11 financial year and an estimated return to surplus during the 2012-13, which happens to be an election year.

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The unemployment level for this year is estimated to reach 4.75% and 5.0% next financial year while GDP is forecast to hit 3.25% during 2010 and climb to 3.75% in 2012 -13.

Already analysts are worried about the implications this will bring on the Reserved Bank in raising interest rates and the flow on effect on the economy’s balance of payments, foreign exchange earnings and increase in cheaper imports especially over the Christmas period in addition to the cost of mortgages, new housing and the over all cost of living.

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Last week the Reserve Bank saw fit to increase interest rates by a further 0.25 basis points adding further speculation that the four major trading banks will increase their rates further because of the cost of borrowing money.

Thus far the Commonwealth Bank of Australia has been alone in lifting their mortgage rates to twice that of the Reserve Bank and their CEO has come under attack after predicting a number of people will be forced into bank foreclosures and loss of their homes during the next few months.

The opposition treasurer Joe Hocking launched a scathing attack on the Government last week for not imposing stricter controls over the country’s four big banks who have freedom to lift interest rates to what ever level they see fit, despite their announcing huge profits for the first half of 2010.

Leading up to the Christmas period this latest rate rise will have drastic effects on retail figures and could result in higher job losses in the first quarter of the New Year.

This week the Sydney Opera house was packed with the usual politicians and other dignitaries as the New South Wales Government paid homage in a memorial service to honour Dame Joan Sutherland considered by many to be the country’s finest international opera star who died at her Switzerland home last month aged 83.

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