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Friday, 9 March, 2001, 06:42 GMT
Aussie dollar at all-time low
Australian PM John Howard
Mr Howard does his best to talk up the economy.
The Australian dollar has dropped to an all-time low against the US dollar.

And analysts predict the currency could fall even further. Michael Workman, a currency strategist with Commonwealth Bank, said the Australian dollar's fortunes resembled "road kill".

Australian Stock Exchange in Sydney
The stock markets remain stable despite the dollar weakness.
Economists say the Australian dollar has been hit by a "triple whammy" of falling gross domestic product, a cut in interest rates and economic weakness in the country's main export markets.

On Friday, one Australian dollar bought just over US$0.50, and some traders predict the US$0.48 mark could be reached soon.

The stock market remained firm despite the weak dollar, with the All Ordinaries Index closing down just 0.38% at 3,276.9.

Government under fire

As Australia's economic problems begin to pinch, Prime Minister John Howard's government has been under increasing fire.

Critics accuse Mr Howard of having, in effect, engineered a recession, a charge he has denied.

In an interview with an Australian commercial radio station, Mr Howard did his best to put a positive spin on the situation.

"Can I say the weaker dollar has the silver lining that in relation to commodity prices and commodity exports it does boost them quite a lot," he said.

However, an economic crisis in Japan, caused by a comment by its finance minister Kiichi Miyazawa that the debt burden is pushing the government's finances close to collapse, is expected to hurt the Australian economy, a possibility that Mr Howard acknowledged.

Recent rate cut

The Reserve Bank of Australia earlier this week took the unusual measure of cutting interest rates for the second time within a month.

The rate cut was seen as an attempt to halt a slide into recession.

Interest rates were cut to 5.5%, down from 6% a month earlier.

The decision came after key economic data revealed that the economy was in negative growth for the first time in a decade.

Politicians and economists' fears that Australia is heading for a recession - technically defined as two consecutive quarters of negative growth - were strong then, and they have hardly been lessened by the problems in Japan.

Recession fears were fuelled when, shortly after the second interest rate cut, the government revealed that the nation's gross domestic product (GDP) - the broadest economic indicator - was 0.6% lower in the final three months of the year compared to the previous quarter.

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See also:

07 Mar 01 | Business
Australia fears recession
22 Feb 01 | Business
Tough market for Qantas
04 Oct 00 | Asia-Pacific
Australia's Olympic minister bows out
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