A lower $A needed now

A lower $A needed now! Last Tuesday, Australian Financial Review's front page had a significant headline that should be noted by investors, Treasury says lower $A to avoid income crunch. The report reviewed a presentation from the Treasury head of macro-economics to the Melbourne Economic Forum. His message was simple. Australians could be entering a period of lower standards of living if the Australian dollar does not depreciate. The previous day a team led by Professor Ross Garnaut presented a paper that forecast tough times ahead as the resources capital investment cycle moves to an inevitable conclusion. Australian investors will have to consider an allocation of capital to offshore markets. For some investors, this will be met by a simple response to invest in world equity market indices. However, this approach may prove fruitless unless both economic and company earnings growth becomes more widespread across the US and Europe. (VIEW LINK)