On the back of a successful US $29 billion auction of US Treasury bonds, improving sentiments in the local equity markets combined with China’s announcement that it is cutting the export quota for rare earths by 35% in the first half of next year, the Australian dollar has hit a new 28-year high of 101.98 US cents at 12.45pm eastern daylight time, the highest level since the currency was floated in the early 1980s.
As a result, Australia’s emerging rare earths producers and explorers are enjoying a year-end surge in value as investors chased down their stocks. ASX-listed developer Lynas Corp surged 11% or 17.5 cents to $1.795 while Arafura climbed 13.5 cents to $1.355.
This development is adding more fuel to the strength of the dollar which has been widely seen as being overvalued by many analysts. Local businesses and corporations involved in tourism, education, manufacturing and exports are already feeling the wrath of the Aussie dollar as their products become less expensive in international markets. The emerging rare earths market will further drive a wedge between Australia’s 2-speed economy whereby the mining and exploration industries are powering ahead with strong sales performance whilst the rest of the economy is lagging behind.
Job activity, increase in new property sales and the influx of new workers in some mining towns are already putting pressure on prices of certain type of properties. Investors have started investing in these towns some of which have seen house and land package developers increasing prices as each new phase is rolled out. Property markets across Australia will become even more fragmented whereby there will be an increasing number of suburbs and locations with strong growth, plateauing and declining, all at the same time albeit at varying degrees. Interest from overseas investors have declined steadily as the dollar grew from strength to strength.