The Australian dollar has seen remarkable recovery since the 30% decrease. It is almost square with the US dollar. This has happened for the first time since 1982. This shows the strength of the Australian economy in the current scenario.
Australian Dollar Rising
What are the reasons for this strength? There are many:
The Asian Connect – Australia is benefiting from the Asian economy. Asia is one of the fastest growing region of the world, and strong ties at the right time has helped Australia to grow as well. The demand for Australian goods in Asia is pushing the AUD to become stronger.
Volatile US and EU – The volatility of the markets in US and the EU crisis has made Australia a place for safe investment. The stability of the Australian economy has helped in rise of the Australian Dollar.
Healthy Economy – The healthy state of the economy in Australia is the main reason for the strong currency. When the whole world was reeling from the slowdown, Australia was the least affected. The reason being strong policy measures.
Demand of mining products – The Asian countries are towards commodity intensive stage of growth. Hence the demand for mining products is more. This has led to mining activities increasing in Australia. Strong demands from China is driving the mining industry. This helps the rise of the currency as well.
Reserve Bank holding off – The Reserve bank has desisted from cutting interest rates. This has shown positive results with the Australian Dollar reaching parity with the US dollar.
Rapid population growth, foreign investments are the factors pushing the Australian economy ahead. With increase in trading partners the Economy looks to be speeding ahead. This is the era for growth for Australia.
The investors are the driving force behind the rosy scene. They seem confident and willing to invest more resulting in around 4 percent growth. The major trading partner countries are recovering at a normal pace now. The economy is picking up in Asia, and Asia is one of the major export markets for Australia. Australia is one of the hot destinations for immigrants, which adds to the skill level of the workforce. Lesser exports to China have been offset by increasing demands in East Asia.
The increasing House prices in Australia
Household incomes are rising and will support the growing needs for housing. The construction industry is likely to have more appreciated growth. In spite of high rates for property, there is no case for alarms. The debt payment is having very healthy trend. Mortgage credit which has put down major economies is hardly a factor in Australia.
Jobs available to skilled class has shown a growth of 2.7 percent indicating the growth in the economy. The unemployment rate is one of the lowest in the last decade at 4 percent.
It is one of the few economies across the globe where lending cost has gone up. The hope is that the upswing will continue further adding to wealth of the common Australians.
Tourism is also supporting the economy well. With major tournaments like Australian Open Tennis and the World Cup in early 2015 will add to the economy. The early legislations protecting the environment are bearing fruit. People from all over the world are coming over to experience the unique wild life and the scenery.
Australian economy is rocking at the moment!!!!!!!
Australia is no stranger to current account deficit- it has been a constant companion for more than a century, at least. However, the September quarter has seen a 10% reduction in current account deficits. The Australian Bureau of Statistics was expecting a slight reduction in the deficit- but not to the tune of 10%. This is just a sweet surprise, in a way.
Current account is the account that measures the international flow of income. The current account measures transfer of dividends, aid, interest payments, etc. between Australia and other countries. The second quarter of this year saw a doubling of deficit, thanks to decreasing exports and a perceivable drop in commodity prices. However, exports have picked up again and this surplus supply has caused the deficit to slim from $13.9 billion to $12.5 billion.
This has been a fairly good year for the Australian economy, at least as far as current account deficits are concerned, since it hit a three decade low! The Australian economy has seen a surplus supply thanks to increasing exports. Australia’s trade agreements with China and Japan and other countries might have something to do with this. It might certainly help the country’s economy to promote trade agreements with other countries.
The G20 summit is just coming to a close, the world leaders are leaving the heat of Brisbane and returning to their (mostly) colder home countries. One central aspect of this summit that partially became a mere side story was that the G20 is actually meant to be all about the economy. How much a two day meeting of the leaders of the most wealthy and powerful countries can actually change with regards to how the global economy will develop is obviously up for discussion. The economic policy outcome of this summit is surely underwhelming and neither very innovative nor undisputed.
On the other hand, the economy did not seem to be the most important issue for this summit anyway. While Mr Abbott did forgo his plan to ‘shirtfront’ Russian President Vladimir Putin and instead played the host, many of the other world leaders took the chance to confront Putin over his actions in the Ukraine. For Angela Merkel, David Cameron and Barack Obama, amongst others, Putin has overstepped too many lines.
Not living up to the Russian responsibility for the MH17 disaster, backing up the anti-Ukrainian separatists and even sending ‘aid’ and soldiers into a foreign country is unacceptable behaviour in a post-Cold War century. While I doubt that the personal pressure from these leaders will make Putin change his course, the fact that he couldn’t wait to leave Brisbane and remove himself from these confrontations does hint that at least his macho-selfesteem is partially an act.
So I was reading an article recently about the exports to China slowing down. Apparently this has had a negative effect on the Australian economy. Who knew we were so intimately linked to the Asian market. So what is the reality of the Australian economy now with its linkages to China?
“China is a big reason for that economic resilience. Australia sailed through its toughest challenge, the global financial crisis, thanks largely to China’s appetite for mined-in-Australia iron ore, coal, and other minerals. China is Australia’s No. 1 trading partner, accounting for more than a third of its exports.”
So Australian exports are contributing to the growth of the Chinese economy and also contributing to the economic bubble that the Australian population has been living in for the past 2 decades. It’s similar to other cases such as Canada where it was not hit as hard as the U.S. due to their exports as well and their oil. Now that China has cut down on its use of Australian coal the Australian companies have been diversifying to keep the economy fresh. They have been reaching out into other industries such as cattle ranching and finding new inventive commodities to export to China as the middle class grows. A very interesting outlook on the dynamism of the market and from North-South trade from a new angle.