The British pound fell to $US1.03, its lowest ever level as investors were spooked by the pledge from new prime minister Elizabeth Truss to deliver big tax cuts with billions of pounds in borrowed money.

The flight has been to the US dollar. Even the Bank of Japan was forced to intervene to prop up its own currency. The Euro was also at US96 cents because of concerns over Russia’s new threats about using nuclear weapons in Ukraine.

The Australian dollar is now at US65 cents, which will have a significant positive impact on exporting companies but put pressure on petrol prices and other imported products.

However, offsetting that was a fall in the oil price over fears of a glut as recession stalks some of the major economies. Moody’s now has global growth at 2.3 per cent for 2023, down from 3.6 per cent.

The Australian economy also has it problems but is being helped by record employment and a booming trade sector.

Locally, the ASX was down another 100 points at midday, but regained some of its losses in afternoon trade. Energy companies like Whitehaven (down 10 per cent), New Hope (down 9 per cent) and Coronado (down 8 per cent) were feeling the most pain as were Origin (down 5 per cent) and lithium company Allkem was down 4 per cent.

Asian markets were also down heavily today.

It came as Federal Treasurer Jim Chalmers said Australia was not immune to the global threats.

“Our expectation is that the Australian economy will continue to grow but so will the challenges to the Australian economy,” Chalmers said.

While accepting that there may have to be debate around taxes, the stage three tax cuts remain on the table ahead of next month’s Budget.

The stage three tax cuts include scrapping the 37 per cent tax bracket for those earning above $120,000 and increasing the top tax bracket threshold from $180,000 to $200,000.

In its outlook, the State Government’s investment manager QIC said the US remained on a knife-edge.

“Our forecasts for the US economy are not too dissimilar from the Fed’s,” chief economist Mathew Peter said.

“We also expect a soft-landing, with the economy narrowly avoiding a recession. However, we expect slightly softer growth in 2022 and a quicker moderation in underlying inflation pressures in 2023.

“We had thought that this would allow the Fed to raise rates less aggressively over the fourth quarter of 2022, with our prior forecasts expecting the Fed to pause its hiking cycle at 3.75-4.00 per cent at the end of the year.

“The messaging by the Fed around their reaction function suggests this is looking increasingly unlikely, with rates now likely to rise well above 4 per cent.”