Thursday, 8 September 2011

Analysis: First Shots Fired in Trade War

WA BUSINESS NEWS: You might not have heard it but the Swiss National Bank yesterday fired a shot which will be heard around the world, and could prove to be bad news for Australia.

What happened is that Switzerland decided that the value of its currency had risen too far against other currencies, imposing an unacceptable burden on exporters.

By some calculations Swiss exporters have been hit with a 30% increase in the value of the franc, forcing them out of some markets, and leading to factory closures.

Sound familiar?

It should because what has been happening in Switzerland has also been happening in Australia – and in other export-focused countries such as Japan and Singapore.

On one level, what the Swiss did with their decision to “peg” the franc at a rate of SF1.20 against the euro was to defend local industry, a move which will play well at home, even if it leads to higher rates of inflation. » | Tim Treadgold | Wednesday, September 07, 2011