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Economy a ‘mixed picture’

TWO months of the GST has given us time to look back to see what the impact has been.

The introduction of the GST provided a degree of distortion of activity and added a further dimension of uncertainty to the overall economic outlook.

The level of unemployment at 6.3 per cent is the lowest for more than 10 years.

The lead-up to the GST had a major impact on consumer sentiment, which rose markedly to record levels during August.

Building approvals behaved in predictable fashion and fell to their lowest levels since 1983. This has led to concerns about the flow on effects on consumption and employment levels.

Exports were up 27 per cent on a year earlier, while imports were up 19.2 per cent over the same period. These factors concerned the Reserve Bank of Australia.

Imports increases can result in inflationary trends being imported into the country.

The factor that concerns the Reserve in regard to the exports is that the level of exports suggests an economy that is strong and therefore possibly inflationary.

The Australian dollar ended August at 57.73¢ against the US dollar. Since then it has copped a hammering and trended markedly lower and is currently at US55.90¢.

It is being propped up by the RBA buying activities and at some stage it may well consider the use of interest rates to shore up the dollar.

The dollar was largely caught in cross trading in overseas markets. The decision by the Bank of England not to raise interest rates saw traders sell the Euro and all other currencies, including the Australian dollar, to buy up the US dollar. That saw the Aussie and the Euro plummet to levels not seen for a long time. The RBA’s attempts to shore up the currency were to no avail.

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