eastunder
12 years ago
AllianceBernstein Sees Decade-High Jobless Rate Spurring RBA Cut
By Candice Zachariahs & Benjamin Purvis - Apr 22, 2013 1:00 AM MT.
http://www.bloomberg.com/news/2013-04-22/alliancebernstein-sees-decade-high-jobless-rate-spurring-rba-cut.html?cmpid=yhoo
AllianceBernstein Holding LP (AB), which manages $437 billion of assets, expects Australiaβs central bank to lower interest rates by as much as 50 basis points this year as the jobless rate rises toward its highest in a decade.
The nationβs currency, which has remained above $1 for a record stretch, will decline as benchmark rates fall and an unprecedented mining investment boom ebbs, Guy Bruten, a senior economist for the Asia Pacific region, said at a briefing in Sydney today. Annual growth in China, Australiaβs largest trading partner, will slow to 7.5 percent on average for the rest of this decade, he said.
βItβs still likely that weβll see one or two interest-rate cuts this year,β Bruten said. βAs this story plays out, with the non-mining sector not accelerating fast enough to take up the slack and as the unemployment rate starts to shift higher, I think that provides the trigger for more rate cuts.β
The jobless rate will probably rise about 1.5 percentage points over 18 months from the 5.6 percent rate seen in March as sectors sensitive to the resources boom begin to shed positions, he said. A 7.1 percent unemployment rate would be the highest since October 2001.
Swaps traders are predicting 39 basis points of cuts over 12 months to the Reserve Bank of Australiaβs 3 percent benchmark, according to a Credit Suisse Group AG index. There is a 53 percent chance that the rate will be reduced to a record- low 2.75 percent at the June 4 meeting, Bloomberg calculations show.
Fair Value
AllianceBernstein estimates the fair value for the Australian dollar near the mid-80 U.S. cent range, though Bruten said it probably wonβt trade down to that level by year-end.
βThatβs the direction weβll be going, whether itβs this year or the end of next year, an Aussie dollar in the 80s seems to be a reasonable forecast,β he said.
The currency bought $1.0282 as of 4:57 p.m. in Sydney, after falling 2.2 percent last week in its biggest decline since May.
In China, βthereβs a great reluctance to try to go for growth at any cost,β said Bruten. The market will have to adjust to a more-slowly growing China as policy makers take the nationβs 7.5 percent growth target seriously, he said.
The Standard & Poorβs GSCI Index of commodities dropped 2.3 percent on April 15 after Chinese data showed gross domestic product rose 7.7 percent in the first quarter from a year earlier, missing the median forecast for 8 percent growth, and slowing from 7.9 percent in the fourth quarter.
Chinaβs slower expansion in the first quarter is βnormalβ as the worldβs second-largest economy sacrifices growth to make structural reforms, Peopleβs Bank of China Governor Zhou Xiaochuan said April 20.
βChinaβs undergoing economic restructuring, which sometimes is not in lockstep with growth,β Zhou said. βWe need to sacrifice short-term growth for the purposes of reforms and structural adjustments.β