RBA Deputy Governor Debelle argued this week that Australia’s net foreign liability position makes Australia less vulnerable than many believe because its net foreign assets tend to rise when the Australian dollar weakens. The dollar’s shock absorber role is beneficial for Australia’s economy in times of turmoil but makes investing into Australian assets a risky proposition for foreign investors. Indeed, we think that a renewed sell-off in global stock markets will weaken the dollar to US$0.65 by year-end.
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