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Reserve Bank of Australia - Source: ONE News
The Reserve Bank of Australia did our struggling manufacturing industry a bit of favour this week when it resumed its cycle of interest rate hikes.
The rise to 4% took the gap in interest rates between the two trans-Tasman countries to 1.5%, which immediately helped to push the New Zealand dollar to a nine-year low against the Australian.
A cross rate of around 76 Australian cents should - assuming firms can lock it in - really help to lift profitability for those sending goods across the Tasman.
Even more so for those manufacturing companies that are buying parts in US dollars and sending the finished product to Australia.
Of course, for those holidaymakers heading across the ditch for a spot of shopping it's an unwelcome development&
Though, they could always head further afield as the Kiwi's buying power relative to the pound is at around 25-year highs.
All this of course highlights how there are always winners and losers with currencies. Exporters to Britain and to some extent the Euro Zone countries won't at the moment be feeling that thrilled.
Likewise, if the Kiwi keeps falling against the greenback motorists here will start to feel it at the pump.
Oil has shown some strength over the last couple of weeks and is now up around $US80.
For borrowers, a hike in interest rates is always a concern, especially in Australia where most are on floating rates.
And, true to form, Australian retail banks did hike rates pretty smartly this week.
That tends to make it a political issue for Australians, and like the last election, it is likely to be so again later this year when Aussies go to the polls.
The opposition will no doubt accuse the government of helping to push up rates too soon through too much spending.
However, the hike in rates across the ditch has to be seen overall as good thing for Australia and the region as it is a clear sign things are returning to normal. Growth is bouncing back and unemployment is falling.
In the end, people should start to be better off and feel more confident as they have more chance of getting a job or getting a pay rise. Surely no one still expects rates to stay at record lows for ever.
New Zealand of course is still - much like the rest of the developed world - quite some way behind Australia in the economic cycle, although it is likely we may still end up hiking rates here before the likes of the UK and Euro Zone.
And, when interest rates rise here, we should try to take it overall as a positive sign: it should happen when there are clear signs unemployment is starting to trend down again and because the economy is looking in better health.
Next week though, the RBNZ won't be moving interest rates when it reviews the OCR.
The recovery in New Zealand at least is still a little too weak to justify that, while dark clouds in Europe are also causing concern.
Of interest though will be the RBNZ's economic predictions, especially its unemployment forecast.
Its last pick on the jobless rate was well off& it will be
interesting to see how they have adjusted it.
