Im just curious as to what will happen to the AUD should the housing bubble burst, with rising unemployment and mortgage default. Would the AUD rise due to the deflationary crash or will the AUD crash from flight of capital and lack of confidence in the aussie economy? Opinions and past examples please
Depends on what your "bubble burst" looks like, but I'd expect it would be AUD going down. In my opinion any major decline in housing is going to wreak havoc with the Australian banks balance sheets and also put great pressure on the government to intervene to prop it up. It would be likely the banks and government would be facing a downgrade of credit rating from the all important AAA and this would be another trigger for major currency flight if the bubble burst itself wasn't enough to trigger panic. Of course if the "bubble burst" scenario is in the context of a wider (global) crisis of some sort there is every chance the AUD will hold up. It's all relative.
Has the property market ever collapsed in this country, can't remember myself. Might have flattened out, but never had a "bursting bubble" Even 1987 stock market crash, was ridden out ok ! There are approx. 75,000 new residents settling in Victoria each year, and so, where do they stay ? What do you actually call a bursting bubble ? And also, who cares ?
Not trying to turning this into a debate about housing, you can believe houses will keep going up forever if you want, but my question is what if it bursts and its impact on the AUD
Apparently it has. Albeit 125 years ago. But you know, it'll definitely happen again. 1891 Crash thread
The value of the AU$, is directly proportional to the Federal Reserve's dictation, to the Reserve bank of Australia, and with regard to the setting of interest rates.
Can we go by example from other nations recent housing collapse to see what happened to their currency? ex USD
It's a good example but I think the historical markers are a bit different. I'm in the flatten, increase, decline, increase camp as per PJ Anderson's property clock. As for AUD. Like a stone.