US shutdown has started from Tuesday, due to the unsettled negotiation between the Republicans and the White House. The US government effectively shut down at midnight in Washington as the two parties did not reach a deal on extending the budget. How will this shutdown affect Australia? For Australia, the initial effect of this shutdown will be small but will cause a drastic effect, if the situation prolongs.
Effect of shutdown on other markets
Anson Rosewall, director of Australian equity sales at BBY says that the investors are looking for a reason to sell and this market situation has provided them, the reasons. The Australian markets have gone slightly down on Monday. According to Commonwealth Bank currency strategist, Joseph Capurso says that the Aussie dollar will go down because of this US shutdown. It will take a month’s time of shutdown to affect the US dollar or the Japanese Yen value. But currencies like the Australian dollar will go down, within a short period.
Effect of prolonged closure
The 1995-1996 shutdown caused only a 0.2% dip in the US economy growth but that 28 days closure had a greater effect on the other markets, If such prolonged closure occurs, then the Australian markets will take a blow. As the investors have got a substantial profit in the recent months, the investments seems to be unaffected for a short period.