Aussie dollar could go down if US Govt shuts down

President Barack Obama
President Barack Obama Bang Showbiz

THE United States Government shutdown could have positive, but short-lived, effects for Australian agriculture and manufacturing exporters, an economics professor said on Tuesday.

After a series of political machinations over the US debt ceiling in recent days, the US Congress was unable to agree to the terms set by the Senate on Tuesday.

Negotiations were effectively killed by a minority of Tea Party Congressmen, who tried to use the deal to delay President Barack Obama's health care reforms for a year.

Unable to reach agreement, the US Government was forced into shutdown mode on Tuesday afternoon (AET), closing non-essential services and putting 800,000 government employees out of work.

But Monash University Economics Professor Jacob Madsen said the shutdown could have small positive effects in Australia.

He said while he believed the impact would last only one to three months, it could help push the Australian dollar down, making exports more competitive.

Prof Madsen said it was due to a paradox which saw global capital flowing back to the US in times of economic crisis.

"Of course, what happens, is people get uncertain, and that can effect the stock exchange and capital flows," he said.

"And that has the implication that the value of the Australian dollar can deteriorate, so that's definitely a positive thing for us."

Prof Madsen said the "worst effect" would be the disagreement forcing another wave of recessions, but he doubted that would happen as it was simply a result of "political game-playing".

The US Government shut down would be the first in 17 years, as a result of the political impasse in Washington.

Topics:  barack obama united states

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