The Australian dollar hit a new 23-year high against the US dollar this morning, bursting through the US90c mark to hit to US90.43c by 12.30pm.
It rose as high as US90.70c in trading this morning and analysts predict it could push past US91c by the end of today.
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Retail sales figures released late last week suggesting a stronger US economy reassured currency traders that the global economy will continue to create demand for Australia’s commodities.
The possibility of higher interest rates in Australia also underpins the surging Australian dollar. That likelihood grew stronger again this morning with the release of data showing that commercial borrowing rose by a whopping 16% seasonally adjusted in August.
The result more than makes up for a 3.2% drop off in personal finance commitments and suggests that business sentiment remains strong despite the international credit wobbles experienced in August.
And, according to research house BIS Shrapnel, business investment is likely to remain at high levels for the next five years. After a slight drop-off following a likely interest rate rise later this year, business investment in the resources and construction sectors will continue, the report says.
Of course, all that investment in the resources and construction sectors will require workers to actually build the buildings and dig the ditches – workers that Australia quite clearly has a shortage of at the moment.
One controversial answer to the problem may be to allow unskilled foreign workers into Australia. Indonesia is reportedly pushing for a free trade agreement that allows low-skilled Indonesian guest-workers into Australia. It’s hard to imagine an Australian government agreeing to such a move, but with the resources sector crying out for labour, if ever there was a time for such a move it’s now.