Aussie dollar could fall to 50 cents and Russia may be to blame January 12, 2015, 10:01 am David Taylor Yahoo7 Finance The Russian economy is in dire straits, while the Aussie dollar continues to head south. I take a look at what could happen from here, and what it means for you. 1 Post Comment I’m sorry but I’m going to be a bit of a finance nerd here. It’s just that it’s not often you see figures this obviously bad. I’m talking about the Russian economy and it’s a grim read. I’ll make a comparison with Australia to help put it in perspective. Australia has an inflation rate of 2.3 per cent. Russia has an inflation rate of 11 per cent. Australia’s official cash rate sits at 2.5 per cent. Russia’s repo rate sits at 17 per cent. The only statistic Russia has us pegged is unemployment. Australia has an unemployment rate of 6.3 per cent. Russia’s unemployment rate is 5.2 per cent. Put simply, something is seriously wrong with the Russian economy. What’s going on? I’m not going to go into too much detail here but there are several factors weighing on Russia’s economy. Firstly, the economy relies heavily on oil. As the price goes down, so does Russia’s wealth. These past few months have seen a significant slump in the price of crude oil. Brent Crude, for example, has fallen from $115 per barrel last June to under $52 today. Secondly, Western sanctions have damaged the economy. Russia’s annexation of Crimea has led to significant trade disruptions. Finally, the collapse of the local currency, the ruble, has forced the central bank to sell tens of billions of dollars in foreign currency reserves. You see Russia has been building up its stash of US dollars (because they’re worth stashing), but over the past few months has had to watch that stash significantly dwindle (as it attempts to support the ruble). If it falls much further the Russian economy could be at risking of defaulting.
Posted on: Mon, 12 Jan 2015 00:53:47 +0000
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