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Takeover needed to ‘electrify’ market

DAVID Hale in his capacity as chief global economist for the Zurich Scudder group based out of Chicago has a keen sense of belonging to the Australian sharemarket.

He often speaks fondly of his playing the Australian sharemarket and in particular the resource sector of the market and the profits gained therein allowing him to complete his economics studies in the 1960s.

Hale has long been regarded in US circles as being the expert when it comes to reading the Australian economy.

On a recent visit to Australia he offered some reasons for the state of the Australian dollar and about our economy generally.

As Hale sees it “Old perceptions die hard, and Australia is still viewed as a commodity-based economy.”

However, as he sees it, a takeover of the “scale of Western Mining or AMP” could electrify the market and reverse the trend.

The technology stock market capitalisation of the US at 30 per cent versus ours at 2 per cent suggests to Hale that the Federal Government needs to review its position on data casting in order to reverse this perception.

In his speech to the National Press Club in Canberra, Hale described the Australian dollar’s decline as being “largely due to the strength of the US dollar, which is experiencing a foreign investment boom.

“The US boom has more enduring features than was thought three years ago when it was described as bubble.com.”

The RBA is believed to have stepped in with foreign reserves to buy a half billion dollars of the Australian currency.

This is a long way short of the Asian currency and hedge fund crises when the RBA purchased over $3 billion of the Australian dollar.

But its reserves must be seriously depleted and the question of whether it can sustain a hedge fund attack must be open to question currently.

The upshot of this could mean that in the event of such an attack there could be potential for another interest rate rise in the near future.

The alternative that David Hale sees is that if the weakness in the Australian dollar is a function of the strength of the US dollar then weakness in the US as a result of such factors as the uncertainty relating to US presidential elections could be the trigger required for us to see an improvement.

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