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NAB sees AUD drop in second half of 2016

James Nason, March 7, 2016

The lower Australian dollar that has supported strong agricultural exports should remain at similar levels through 2016 and well into 2017, NAB Agribusiness predicts.

The long term prediction comes amid a rally in the Australian dollar to 74 US cents, its highest level for eight months, on the back of the release last week of surprisingly positive Australian economic growth data.

However, taking a view across the remainder of the year, NAB Agribusiness believes the $A will reach a low of 67 US cents at the year’s end before trending slowly upward over 2017.

NAB Agri’s view is that lamb and mutton production will fall 7.5pc in 2015-16 and 6.1pc in 2016-17. Overall it forecasts the value of exports to fall 7.6pc in 2015-16 and a further 8.2pc in 2016-17 amid lower export volumes.

For wool, it forecasts price increases of 13.7pc in 2015-16 and 7.5pc in 2016-17.

The higher prices are forecast offset lower production in 2015-16 spur an increase in production in 2016-17.

“We forecast the value of Australian wool exports to increase 8.6pc in 2015-16 and 2016-17.

“In the longer term, textile manufacturing is likely to continue to move away from China towards parts of South-East and South Asia in search of lower wages.

“The Trans-Pacific Partnership will remove tariffs for Australian wool producers upfront.”

Despite the global economic risks, NAB is expecting the Reserve Bank to keep the cash rate on hold throughout 2016, with further recovery expected across the Australian non-mining economy.

Source: NAB. To view the full report visit nab.com.au/agriview

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