The globe turns south

4 August 2008 By Ian Campbell

After doubling against the US dollar, the Australian currency is now plummeting. The prospect of lower rates Down Under is the spark, but the bigger picture is a slowing global economy, which threatens to end a sevenyear commodity boom. Australia won t be the only loser.

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The Reserve Bank of Australia (RBA), the central bank, kept its benchmark interest rate, the cash rate, at 7.25% on Tuesday. The RBA's statement said that credit expansion to both households and businesses has slowed significantly, and there were early signs of an easing in labour market conditions. It said inflation was likely to decline over time, given the outlook for demand, provided wages growth remains moderate and saw scope to move towards a less restrictive stance of monetary policy.

Falling prices for metals and other commodities caused Australian stocks to fall. The benchmark ASX 200 Index fell to its lowest in more than two and a half years.

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