Bushfires to hurt Australian dollar

Financial and commodity markets analytics

The bushfires that are currently tearing through the  Australian countryside are likely to do long lasting damage to the Australian economy and is going to take its toll on the Australian dollar according to some analysts.

The hit to the economy is likely to run into billions of dollars and industries such as tourism are going to feel the brunt of the problem which is a major blow as the industry is so important for the country’s economy.

.Before the bush fires started, the Reserve Bank of Australia had some what backed off on their insistence that lower interest rates would be needed in order to bring some life back into the Australian economy but now that option will be firmly back on the agenda in light of current events

“The fires certainly play into the view that the RBA is, at the margin, going to be more inclined to cut rates than they otherwise might be,” said National Australia Bank’s head of FX strategy, Ray Attrill

“It’s certainly been a factor and that has been reflected in money market pricing.” He added.

An even  bigger impact to hit the Australian economy, and add present more evidence for the RBA to cut rates is the damage done to consumer spending as the Australian population wonder just how long these bushfires will last which will leave them reluctant to spend. Australians were already very concerned about the economic outlook after the slowdown.in growth seen last year which included poor wage growth and an unemployment rate which was very worrying.

These fires are turning out to be the worst in Australia’s history and the long lasting economic impact is likely to keep a lid on the Australian dollar and any future gains are likely to be short lived.

"The size, intensity and duration of the current Australian bushfires mean that they will almost certainly have a larger economic impact than past fires," says David Plank, Head of Australian Economics at ANZ.


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