By ForexNewsNow

The Reserve Bank of Australia has decided to cut interest rates all the way down to 0.25% in anticipation of a very complicated 2020 up ahead. The cuts will materialize in the middle of 2020 in order to accomodate not only the heavy expenditures during Christmas 2019 but to also prepare the consumers for another one in 2020.

Overall, the government is starting to prepare for the worst. Considering all of the indicators that we’ve seen coming from Australia, the preparations are definitely not misplaced. The interest rate cuts are mostly designed to keep the Australian economy floating for the year to come. According to experts, should the rates not had been implemented, it was likely that the economy would take a back turn.

Most consumers are not too worried about the rate cuts, but every firm that has been dealing with some kind of business in Australia could start reconsidering their involvement in the economy. As for the FX brokerages that are dotting Australia left right and center, it’s likely that most of them will start distancing themselves from the AUD/USD pair for now.

What indicators caused such a decision?

Indicators would mostly revolve around the real estate industry, unemployment rates in Australia, wages failing to keep up with inflation and overall price increases for daily necessities and various other factors contributing to the extreme pressure on the Australian economy.

According to experts, if prices continue to rise so quickly, both for the consumers and the employers, it’s very likely that the unemployment range in Australia will each 5.5% in 2020, which will be an unacceptable precedent for not only the ruling party but the local population as well.

Most of the previous attempts at stabilizing the economy were due to paying off as many debts as possible, which is very reminiscent of the population’s situation as well. For once, it seems that the majority of the Aussie population alongside its government are facing the same issues. Paired up with the increase of wages over time, it seems that these Aussie video poker games are starting to catch up to the players as slightly over a billion AUD is currently owed to large gaming companies in the country.

Considering the rate cuts that were just agreed upon, it’s likely that those gaming companies will start pressuring their consumers even more to retrieve as much capital as possible.

Retail stores are also anticipating a very disappointing Christmas this year as well. Considering the failure of wages to keep up with inflation, or simply to remain effective in paying for daily necessities, it’s very likely that the majority of Australian families are going to be having a modest Christmas this year and in 2020 as well.

With so many negative news coming out about the future of the Australian economy, it’s only reasonable to believe that the AUD will take a major hit relative to the USD. Despite Trump’s questionable foreign policies, the US economy has remained relatively firm. Therefore, tripping in front of a stable currency is going to affect the AUD very negatively. Add to that the gas of the interest rate cuts and we get a disastrous situation for every AUD trader.

Hope for improvement?

The rate cuts are definitely not something to rely on 100%, it’s just a temporary fix which has been mentioned by multiple experts as well. The real issue that Australia is facing right now is the failure to increase wages, which directly indicates the failure of most of its private companies failing to grow.

It’s easily understandable as well. Billions lost due to the US-China trade war has drastically affected the Australian economy. Considering the droughts and natural disasters that have been plaguing the country have had serious issues with its agricultural sector, and therefore most of its exports.

The Climate Change issue has been tampering with the country’s biggest mining industries as well. Overall, the issues keep on piling on top of each other, and there’s no interest rate cut that could help the economy emerge from such a tsunami of negativity.

By ForexNewsNow