Sunday 05 April 2020
Sydney – (dpa)
Policymakers in Australia are facing a new challenge at a time when they are pumping a stimulus package for a tired economy, as the Saudi-Russian dispute has pushed oil prices down, and hit Australia, the world’s third largest carbon fuel.
The cost of crude oil, through which liquefied natural gas is usually priced, has decreased by about two-thirds in the first three months of this year, Bloomberg News reported.
While cheaper gasoline may help families, the rapid growth of the LNG industry in Australia now means that low oil prices are not as positive for the country’s economy as it once was.
According to Bloomberg, this is another problem that the RBA should consider while trying to mitigate the economic repercussions of the Corona virus pandemic.
Central Bank Governor Philip Lowe cut interest rates by a quarter of a percentage point on March 19, and launched a bond-buying program to cut yields and set up a financing mechanism for small businesses.
Bloomberg said there is little expectation that Lowe and the Bank Board will make any adjustments at next Tuesday’s meeting, as they continue to monitor the impact of the emergency steps.
On Thursday, the central bank issued its semi-annual review of the country’s financial system.
A number of economists expected that the unemployment rate would jump to more than 10 percent, in addition to a severe contraction in GDP.
The government and the central bank have pumped around 320 billion Australian dollars (194 billion US dollars), or 16.4 percent of gross domestic product.
In the midst of a health crisis caused by the Corona virus, Saudi Arabia and Russia, the two superpowers in the production of hydrocarbons, entered into a struggle over oil production, which prompted Saudi Arabia to boost production, which led to lower global prices.
Australia is the largest exporter of LNG in the world, bypassing Qatar, when it shipped about 77 million tons worth 49 billion Australian dollars in 2019.
LNG is the third largest commodity exported by Australia, equivalent to about 2.5 percent of GDP, but it will be severely affected by those prices associated with crude oil.
“The decline in oil prices is hurting the Australian economy more than it helps. This may come as a surprise, given that Australia is a net importer of oil. But transforming the Australian economy over the past decade into the world’s largest exporter of LNG means that the decline in oil prices It could halve the value of Australian shipments of LNG that have reached Japan, putting at risk exports that account for 2.5 percent of gross domestic product.