Lisa Dudzik talks about the latest and most important headlines to come out of Australia. Today’s blog entry will touch on the Australian economy and plans for the environment.
Earlier this month, the Reserve Bank of Australia had cut interest rates to a record low of 1.5%, cutting off 25 basis points from its benchmark. The move is projected to weaken the Australian dollar, in part to help the economy complete its transition from a commodity exporting economy to one driven by domestic factors such as the services and real estate industry.
One reason why the Australian dollar has remained strong despite the slow economic growth is because investors have continued to seek yield from Australian bonds. Compared elsewhere, in other developed countries such as Japan, investors continue to face negative yields. Instead of allowing their money to grow, or keeping it intact at the very least, such bonds only cost investors for no reason other than the negative return.
With so few viable options left for investors, Australia is considered as one of the last havens with positive returns. The Reserve Bank of Australia, however, noted that the interest rate might have to be cut even further, down to 1% in order to sustain the country’s slowing economic growth. Analysts looked at inflation rates, the consumer price index and exports data to support their case for a slowing economy.
The news may not entirely be welcomed by citizens, but the growing pains brought about by the shift in the economy still hold tremendous potential in the long run. Right now, Australia stands to benefit more from veering away from commodities, which are at record low prices. This is because moving away is still relatively better than waiting and guessing where prices will hit bottom.
In the meantime, this gives the economy the license it needs to seek alternatives and new ways to prop up the economy. Fortunately, compared to other developed countries like Japan and those in Europe, Australia has the advantage of learning from these countries’ costly stimulus experiments.
On the environmental front, Australia is about to get its first large-scale hybrid wind-solar farm near Canberra. The Australian Renewable Energy Agency awarded last month a $9.9 million grant to Goldwind, the Chinese company that will build a 10MW solar photovoltaic plant in the Gullen Range wind farm.
Once built, the solar farm is projected to generate 22,000 MWh of power within its first year, which is estimated to be capable of supporting around 3,000 homes. The reasons for co-location or why the solar farm will be built on the existing wind farm is to save as much as 20% on costs, and to tap the two energy’s complementary nature. Both energy sources have different times for peak output, which can result in continuous energy generation.
The project is a landmark energy project, paving the way for more companies to follow the novel approach of co-location. Apart from the lower costs, it also amounts to more efficient power generation.
For more updates by Lisa Dudzik about Australia, please stay tuned to this page.