The Australian dollar could plunge below US60c in the coming months according to an economist from private bank Deltec. Atul Lele is the chief investment officer at the bank and sees parallels between the Australian economy right now and that of Canada’s.
Mr Lele says economies like Australia and Canada which are commodity-focused are not part of global growth occurring elsewhere in the world.
According to Mr Lele, who spoke to The Sydney Morning Herald, Canada’s economy has been deteriorating and provides an insight into what our economy here in Australia will look like soon.
This includes a plunging Australian dollar, which he says he can see going into the US50s.
“Canada is a fantastic six-month preview of what’s going to happen to Australia,” Mr Lele said.
“The Australian dollar, it’s going below US70c in the next six months quite easily.”
“More importantly, it’s not bouncing back any time soon.”
“I can easily see a scenario where it goes into the US50s,” he told The Sydney Morning Herald.
Last week the Bank of Canada cut their interest rates to 0.5 per cent prompted by fresh declines in the oil price and the difficulties of transitioning to non-energy-led growth.
Despite this the Canadian bank declined they were in recession, but Mr Lele says the Australian economy will have to go into recession and that is inevitable.
“Australia in some sense is like an emerging market,” he said.
“It’s exposed to some of the same dynamics of commodities and fiscal policymakers have not undertaken enough structural reform…it almost has the same problem that emerging markets are facing now.”
Deltec Bank continue to hold its long-term view that commodities will continue to struggle, except in agriculture.