‘‘Manufacturers are telling us that, while the fall in the Australian dollar and the May interest rate cut have been extremely welcome, they have not yet been enough to turn around a very challenging business environment, locally and internationally"
-Innes Willox, AIG's chief executive officer
Manufacturing activity in Australia continues to suffer, contracting for the 25th consecutive month in July, suggesting record-low borrowing costs and a decline in the currency failed to boost exports and domestic demand, raising concern additional stimulus may be needed to boost growth in the country. A report from the Australian Industry Group showed that a gauge of manufacturing activity tumbled 7.6 points to 42 last month, posting the biggest decline since April, and moving further below the 50 threshold. Last time the reading was indicating an expansion in the sector, was in February 2012.
The Aussie dropped below 90 U.S. cents during this week, and slumped 12% during the second quarter, posting the longest stretch above the parity level since it was freely floated in 1983. Even despite the fact the Reserve Bank of Australia left its policy unchanged last month, more than 90% of economists are expecting to see a rate-cut next week. The RBA has reduced borrowing costs by 2% since late 2012, as the nation's policy makers are aiming at rebalancing the economy toward employment-intensive industries, like residential construction, as returns from the mining sector are moving to its peak and soon the boom will wane, while a slowdown in China is a major concern as well.
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