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On US Election Results – Interest Rates and Taxes


So, the US election results are in.  How will this impact our domestic interest rates and taxes?

The Republicans (Trump) have now been voted in to the Presidency and now have control of the Congress and Senate (for at least two years).  This also means they have the wherewithal to appoint the next Justice to the Supreme Court.  This will therefore make the highest Court in the US conservative in approach.

What do the US election results mean for Australia?

In all honesty, probably not much.  We have a very secure and long-standing alliance with the Americans.  Can’t see that altering.

The only things that might occur are:

It could increase pressure on the RBA to further drop interest rates over here.  The rationale behind this thinking?

  • if Trump does change the various Free Trade Agreements currently in place, there is a chance this will devalue the US Dollar (note that, as of writing this, the USD has only “come off” about one cent – from 77 to 76 cents);
  • where the US dollar devalues, the price of our exports will increase (relatively);
  • this will have a significant impact on the global competitiveness of our exports;
  • to enable exports to be “cheaper”, the Aussie Dollar needs to be lower;
  • the only real way to lower the exchange rate is to reduce Australian interest rates to make the currency “less competitive” on the global stage.

And:

It may have some flow-on effect where large businesses relocate their Head Offices and or operations to the US to take advantage of the (proposed) lower corporate tax rate.  Put it this way, if you’re operating in both Australia and the US and taxes in the latter are 50% of those that apply here, why wouldn’t you relocate?  If Trump does get a significant reduction in taxes through, it may place pressure on our government to address the taxa rates over here.

So, on the ground, we possibly won’t notice much.  However, if all goes according to the crystal ball, we need to consider the impact on our interest rates and taxes and what it means for your business and our nation.

Simples Hey?

 

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