1 00:00:03,680 --> 00:00:06,440 Speaker 1: Welcome to Ask Fear and Greed, where we answer questions 2 00:00:06,440 --> 00:00:10,920 Speaker 1: about business, investing, economics, politics and more. I'm Michael Thompson 3 00:00:10,960 --> 00:00:15,080 Speaker 1: and hello Sean Aylmer. Hello, Michael, Sean got a great 4 00:00:15,160 --> 00:00:17,400 Speaker 1: question for you today, and try not to get too 5 00:00:17,440 --> 00:00:21,520 Speaker 1: cranky as you answer it. All right, go on, promise, 6 00:00:21,920 --> 00:00:26,400 Speaker 1: get any promise, promise you promise to try. The Aussie 7 00:00:26,440 --> 00:00:29,560 Speaker 1: dollar is rising against the green bag. 8 00:00:29,720 --> 00:00:31,720 Speaker 2: But go on. 9 00:00:32,120 --> 00:00:36,040 Speaker 1: But it is at multi year lows against the euro. 10 00:00:36,760 --> 00:00:39,360 Speaker 2: Ah, well, who'd be going to Europe this year? Michael? 11 00:00:40,000 --> 00:00:43,559 Speaker 1: It's not me, Sean. So this you promised that you 12 00:00:43,600 --> 00:00:47,519 Speaker 1: weren't going to get cranky. It's also not great against 13 00:00:47,600 --> 00:00:51,240 Speaker 1: the pound. You're not plenty on going to the UK 14 00:00:51,320 --> 00:00:51,760 Speaker 1: at all. 15 00:00:52,120 --> 00:00:54,160 Speaker 2: Only for two weeks. That's fine. 16 00:00:54,160 --> 00:00:58,200 Speaker 1: Then why is there such a difference between how it 17 00:00:58,320 --> 00:01:01,120 Speaker 1: is moving against the US dollar compared to the Euro 18 00:01:01,280 --> 00:01:01,880 Speaker 1: and the pound? 19 00:01:02,040 --> 00:01:07,160 Speaker 2: That is the question, right, So we have a floating 20 00:01:07,160 --> 00:01:13,200 Speaker 2: exchange rate. Therefore demand and supply dictates the value of 21 00:01:13,240 --> 00:01:16,320 Speaker 2: the Australian dollar. We often think about it's good if 22 00:01:16,319 --> 00:01:19,920 Speaker 2: it's going up, bad if it's going down. But I mean, 23 00:01:20,000 --> 00:01:22,479 Speaker 2: unless you're me and pure self interest, when you want 24 00:01:22,480 --> 00:01:27,119 Speaker 2: to travel overseas. That's not actually correct. It's just the price, 25 00:01:27,840 --> 00:01:30,640 Speaker 2: and sometimes if it goes down, it makes Australian stuff cheaper, 26 00:01:30,760 --> 00:01:34,039 Speaker 2: so that's actually better for the economy. When you think 27 00:01:34,040 --> 00:01:35,920 Speaker 2: about the Aussie dollar, you have to think about what 28 00:01:36,080 --> 00:01:39,400 Speaker 2: drives it, and this comes to the heart of the question. 29 00:01:39,800 --> 00:01:45,160 Speaker 2: There are short term factors and longer term factors. In 30 00:01:45,240 --> 00:01:50,000 Speaker 2: the short term, interest rate differentials between countries really matter. 31 00:01:50,320 --> 00:01:52,320 Speaker 2: So let's say I've got ten million dollars and I'm 32 00:01:52,320 --> 00:01:54,600 Speaker 2: thinking where am I going to park this for a 33 00:01:54,640 --> 00:01:57,600 Speaker 2: few months before I go and buy a business, If 34 00:01:57,640 --> 00:02:00,120 Speaker 2: I can get a much higher interest rate in Australia 35 00:02:00,240 --> 00:02:04,200 Speaker 2: than I could in another country, all other things being equal, 36 00:02:04,200 --> 00:02:06,960 Speaker 2: which of course they're not, there's risk issues in that, well, 37 00:02:06,960 --> 00:02:08,520 Speaker 2: I might as well put it in. But let's say 38 00:02:08,560 --> 00:02:10,320 Speaker 2: they are, well, I might as well put that money 39 00:02:10,320 --> 00:02:12,720 Speaker 2: into Australia, and I've got to buy Aussie dollars for that, 40 00:02:12,800 --> 00:02:15,360 Speaker 2: so it pushes up the price. So if Australian interest 41 00:02:15,440 --> 00:02:21,360 Speaker 2: rates are relatively high versus other countries like then we 42 00:02:21,480 --> 00:02:26,400 Speaker 2: do okay. In the longer term, Australia is in commodities, 43 00:02:26,680 --> 00:02:29,640 Speaker 2: so I think I might be wrong here, but I 44 00:02:29,680 --> 00:02:34,880 Speaker 2: think our ten biggest exports are commodities, and so if 45 00:02:34,919 --> 00:02:39,000 Speaker 2: people are buying Ossie coal, Aussie iron ore might be 46 00:02:39,040 --> 00:02:43,280 Speaker 2: priced in dollars, but BHP and those groups they want, 47 00:02:43,760 --> 00:02:46,160 Speaker 2: sorry it might be priced in US dollars. They have 48 00:02:46,240 --> 00:02:50,680 Speaker 2: to pay Aussie dollars, so they demand Australian dollars. So 49 00:02:50,720 --> 00:02:54,160 Speaker 2: when commodity prices go up, that means the Aussie dollar 50 00:02:55,120 --> 00:02:58,960 Speaker 2: tends to rise. The other thing at the moment is 51 00:02:59,080 --> 00:03:01,840 Speaker 2: risk sentiment. This kind of comes to the heart of 52 00:03:01,919 --> 00:03:08,200 Speaker 2: the question, right, Okay, our currency more than their euro, 53 00:03:08,400 --> 00:03:10,640 Speaker 2: more than the pound, more than the end, more than 54 00:03:10,639 --> 00:03:14,079 Speaker 2: the US dollar kind of is not kind of is 55 00:03:14,120 --> 00:03:22,240 Speaker 2: heavily influenced by changes in risk sentiment across global macroeconomics. Basically, 56 00:03:22,760 --> 00:03:28,240 Speaker 2: we're considered a risk currency because of our close connection 57 00:03:28,400 --> 00:03:33,280 Speaker 2: to commodity prices are relatively small economic size, that type 58 00:03:33,280 --> 00:03:38,600 Speaker 2: of thing. So when you have pandemics and tensions in 59 00:03:38,640 --> 00:03:43,360 Speaker 2: between Europe and the Middle East and Trump tariffs, the 60 00:03:43,400 --> 00:03:47,640 Speaker 2: Aussie isn't something that investors necessarily want to hold, okay, 61 00:03:48,320 --> 00:03:52,320 Speaker 2: because we're a riskier currency, and so when we've had 62 00:03:52,320 --> 00:03:56,720 Speaker 2: the US dollar depreciate against global currencies in recent weeks, 63 00:03:56,720 --> 00:03:59,120 Speaker 2: and that's on the back of people worrying about the 64 00:03:59,200 --> 00:04:02,400 Speaker 2: risk of holding US dollars. They're not rushing to the Aussie, 65 00:04:02,440 --> 00:04:05,160 Speaker 2: They're rushing to the Euro. They're rushing to the end, 66 00:04:05,200 --> 00:04:06,720 Speaker 2: they're rushing to the pound. 67 00:04:08,560 --> 00:04:11,400 Speaker 1: Okay, if I may ask you a follow up question 68 00:04:11,640 --> 00:04:19,560 Speaker 1: based on please please do. Obviously, for overseas travelers heading overseas, 69 00:04:20,600 --> 00:04:22,800 Speaker 1: you would benefit from the Aussie dollar being higher. But 70 00:04:22,839 --> 00:04:24,600 Speaker 1: as you say, really that's kind of very it's a 71 00:04:24,680 --> 00:04:27,520 Speaker 1: very public thing and often that's what news reports will 72 00:04:27,520 --> 00:04:29,680 Speaker 1: focus on, kind of and that's why everyone thinks that 73 00:04:29,680 --> 00:04:32,160 Speaker 1: that kind of the dollar going down is a bad thing. 74 00:04:32,160 --> 00:04:35,159 Speaker 1: But as you say, the dollar going down actually makes 75 00:04:35,200 --> 00:04:41,159 Speaker 1: things cheaper for businesses, for ossie goods and good for 76 00:04:41,200 --> 00:04:45,640 Speaker 1: the economy. Is there in that case a sweet spot? 77 00:04:46,160 --> 00:04:49,680 Speaker 1: What is the ideal place for the currency to sit 78 00:04:49,760 --> 00:04:52,120 Speaker 1: at the point for the for the Aussie dollar to 79 00:04:52,160 --> 00:04:54,360 Speaker 1: sit at that is going to kind of deliver best 80 00:04:54,480 --> 00:04:56,560 Speaker 1: value overall. 81 00:04:57,240 --> 00:05:01,120 Speaker 2: So that there's not really a sweet spot. If I'm 82 00:05:01,120 --> 00:05:05,679 Speaker 2: a manufacturer trying to sell overseas, then my sweet spot 83 00:05:05,880 --> 00:05:08,880 Speaker 2: is sixty cents. If I'm a terrorism operator here trying 84 00:05:08,920 --> 00:05:12,400 Speaker 2: to encourage Australians to go and travel Europe and North America. 85 00:05:12,720 --> 00:05:15,200 Speaker 2: Then my sweet spot is eighty cents because that's going 86 00:05:15,200 --> 00:05:17,520 Speaker 2: to encourage more people to go and do that. So 87 00:05:17,800 --> 00:05:20,279 Speaker 2: there's not really a sweet spot. The long term average 88 00:05:20,400 --> 00:05:23,080 Speaker 2: is kind of since the float of the dollar in 89 00:05:23,120 --> 00:05:28,960 Speaker 2: eighty three is probably low seventies, So maybe that's where 90 00:05:29,000 --> 00:05:32,279 Speaker 2: you say the sweet spot is. But it really is 91 00:05:32,320 --> 00:05:36,320 Speaker 2: in the eye of the beholder in terms of, you know, 92 00:05:36,520 --> 00:05:38,800 Speaker 2: where people want the currency to be. 93 00:05:38,960 --> 00:05:41,320 Speaker 1: Okay, all right, so there really isn't just one kind 94 00:05:41,360 --> 00:05:43,880 Speaker 1: of ideal place for it to land that is going 95 00:05:43,920 --> 00:05:46,760 Speaker 1: to do the greatest good for the economy overall while 96 00:05:46,800 --> 00:05:51,600 Speaker 1: also being relatively satisfactory for traveler's heading overseas. 97 00:05:51,680 --> 00:05:54,719 Speaker 2: Yeah, I mean, I don't know. Maybe some economists has 98 00:05:54,920 --> 00:05:58,760 Speaker 2: microeconomists has worked that out, but I don't think there is, 99 00:05:58,839 --> 00:06:02,920 Speaker 2: because it just totally depends on the individual they're. 100 00:06:02,960 --> 00:06:06,200 Speaker 1: Role in it now, depending on this individual here in 101 00:06:06,240 --> 00:06:09,040 Speaker 1: the studio with me one Sean Ayler, where would you 102 00:06:09,200 --> 00:06:09,680 Speaker 1: like it to be? 103 00:06:10,839 --> 00:06:14,520 Speaker 2: Ten? Well, actually, just you know, I don't know, seventy 104 00:06:14,680 --> 00:06:16,200 Speaker 2: rady against the pens would be handy. 105 00:06:17,000 --> 00:06:18,840 Speaker 1: Just anything normal where it is at the moment. 106 00:06:18,960 --> 00:06:22,280 Speaker 2: R yeah, yeah, yeah, just like twenty five, thirty doubles, whatever. 107 00:06:22,640 --> 00:06:24,520 Speaker 1: Yeah, it doesn't really matter. You're not you're not fussy. 108 00:06:24,640 --> 00:06:30,600 Speaker 1: Just improve, all right. I think we answered that question maybe, yeah, adequately. 109 00:06:31,120 --> 00:06:33,040 Speaker 1: If I was at market as I'd like to do, 110 00:06:33,640 --> 00:06:34,800 Speaker 1: I would say distinction. 111 00:06:35,760 --> 00:06:38,080 Speaker 2: Look, I'd say that's like a seven and a half 112 00:06:38,120 --> 00:06:39,279 Speaker 2: to eight, which is a distinction. 113 00:06:39,320 --> 00:06:42,080 Speaker 1: I think, Yeah, you know that's good. Maybe an HD 114 00:06:42,240 --> 00:06:45,520 Speaker 1: on a good day, maybe generous. 115 00:06:45,120 --> 00:06:46,560 Speaker 2: On a poor marking day. 116 00:06:46,880 --> 00:06:49,640 Speaker 1: Yeah, it depends on what the competition is like. Thank 117 00:06:49,680 --> 00:06:52,160 Speaker 1: you very much, Sean, Thank you, Michael. 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