Weak economic growth and cash rate cuts will drive the Australian dollar down to 68 US cents in the second half of 2019, according to Westpac economists.
The dollar is currently buying around 70 US cents, where it has hovered since the beginning of March.
Westpac Senior Economist Elliot Clarke said it will fall from this mark against the greenback as the gap between the cash rates of Australia and the US widens.
Westpac has forecast the Reserve Bank of Australia (RBA) to cut the cash rate by 25 basis points in both August and November in 2019 amid weak economic growth and global risks.
“If we are also correct in forecasting one final rate hike for this cycle from the US Federal Open Market Committee, then by end-2019, the policy rate differential between Australia and the US would stretch to 163 basis points, a highly-abnormal spread versus history,” Mr Clarke said.
Given the size of this anticipated differential in the policy rates between the two currencies, Mr Clarke said the 68 cent forecast “appears modest”.
According to Mr Clarke, there are two main factors that justify the forecasted value from being lower:
- key commodity prices holding up better than anticipated
- very strong demand for Australian assets from foreign investors
Consider travel destinations where the Aussie dollar goes further
A lower Aussie dollar usually means Aussie travellers get less bang for their buck overseas.
But according to RACQ Insurance, there are still some countries right now where the Aussie dollar can go far and buy great value.
These countries include Hong Kong, New Zealand, Argentina, Georgia, Malaysia, Thailand, Indonesia, India and South Korea.
RACQ reports the Aussie dollar buys about the same in Canada and Singapore, but is not so great in the UK, USA and Switzerland.
RACQ spokesperson Clare Hunter said researching how much of the local currency one Aussie dollar can buy is a great place to start when planning an overseas getaway.
“A good trick is to research how much
Ms Hunter said well-trodden tourist hot spots like Bali and Thailand weren’t the only destinations for budget-conscious travellers.
“Indonesia’s West Papua features breathtaking archipelagos and sparkling oceans, yet hotel rooms can be as little as $20 per day,” she said.
“If South America is on your bucket list, then Argentina is among the cheapest countries to visit while the Aussie dollar can buy amazing African adventures in Namibia and Zambia.
“If Europe is still on your must-do list, it’s worth considering countries outside the western tourist hub, for example, Georgia has stunning mountain views, delightful old villages and for $40 per day you can get a bed, three meals and plenty of site seeing.”
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