Smashed $A – Rudd’s Super Tax Blamed

21 May

Goldman Sachs’ Australian subsidiary, JBWere, has issued a note to clients highlighting the reasons for the ongoing rout in the Australian Dollar, which has nose-dived from USD93c to just USD81c (at time of writing) in just three weeks since April 30.

via ZeroHedge:

Despite our belief that relative growth and relative interest rates suggest some support for the A$ over coming months, it is hard to see a swift resolution to the major sources of risk aversion impacting Australia and its hard to build a compelling case for offshore investors to bid the A$ higher. In that environment it will be difficult for our long-standing 95c target for the A$ around mid-year to be met; however, we still think our 12 month 90c target is still feasible, albeit with the path to 90 now likely to be via near-term weakness. Whether an ongoing decline in the A$ is in prospect will partly hinge on whether the Treasury Secretary’s suggestions that the WACC for the resource sector will be lower are viewed by the market as valid arguments or not. In sum, it is not just risk aversion that is driving the A% lower at present, fundamental factors have also been very important (relative growth, shifting rate expectations, lower commodity prices and capital exit) and the path to lower risk aversion is less dependant on the typical ebb and flow of market sentiment and highly dependant upon the actions of policy makers in Australia and Europe. Our A$ forecasts are now under review.

(emphasis added)

So there you have it, from one of the world’s most powerful investment banks, in their advice to clients. “Fundamental factors” have been “very important” in the rapid sell-off of the Australian Dollar.  And a key factor blamed, is the Rudd government’s “Resource Super-Profits Tax” (RSPT), inspired by Treasury Secretary Ken Henry.

(This is the same Ken Henry who utterly failed to foresee the GFC coming in 2007-08.  The same Ken Henry who, in February this year, publicly announced that the GFC is ‘over’, and predicted that Australia is set for a period of “unprecedented prosperity” lasting to 2050)

The financial markets are now considering the AUD to be a high risk currency. And according to JBWere, the “path to lower risk aversion” is “highly dependant on the actions of policy makers in Australia…”.

Rudd’s proposed “super tax” on the mining industry is not just wiping tens of billions off the value of Australian mining company shares – and the value of your Superannuation account.  It has also pulled the floor out from under the Aussie Dollar.

Insulation program. School halls. Border protection. Computers in schools. Renewable energy. FuelWatch. GroceryWatch. “The greatest moral challenge of our time”.

Does everything this government does turn to $***?

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