The Australian Dollar, AUD, A$
Since its float in December 1983, the Australian dollar has become the fifth most traded currency globally. The Australian dollar has historically been considered a commodity-based currency with strong exposure to Asian economies and has tended to trade inversely to many major currencies. In addition to global growth and resultant commodity demand, the Australian dollar is also influenced by interest rate differentials, global share prices and international geo-political issues and, as such, has generally experienced volatility.
The Australian dollar receives relatively low levels of intervention by Australia's central bank, the Reserve Bank, and benefits from general Australian economic and political stability.
Since floating, the Australian dollar reached a low of 47.75 US cents in April 2001. In October 2010, the Australian dollar reached parity with the US dollar for the first time since free floating and in July 2011 hit a high of $1.1080 against the US dollar.
Current Exchange Rates: Reserve Bank of Australia Exchange Rates
There are a range of banks, FX providers and online FX Services offering competitive products, services and strategies to execute FX and manage risk. These include spot and forward foreign exchange transactions, foreign currency accounts and call and put options.
- Economic Growth 2.4% (twelve months to the December quarter 2016) National Income, Expenditure and Product from the Australian Bureau of Statistics (ABS)
- Inflation 2.1% (twelve months to the March quarter 2017) Consumer Price Index from the Australian Bureau of Statistics (ABS)
- Cash Rate 1.5% (effective 3 May 2017) overnight money market rate set by the Reserve Bank of Australia (RBA).
- Unemployment Rate 5.9% (March 2017) Labour force statistics from the Australian Bureau of Statistics (ABS)
- Average Weekly Earnings A$1,533
Australian Economy Snapshot - Reserve Bank of Australia
Australia has an open, varied, export-oriented economy consistently ranked among the strongest of advanced economies in the Organisation for Economic Co-Operation and Development (OECD). Australia is the world’s 12th largest economy and has had 26 years of uninterrupted annual economic growth. Australia’s economic growth and prosperity reflects increasing connections into the Asian region.
Australia’s economy has been in transition and continues to adjust to the end of the resources boom. The two forces affecting the economy have been falls in mining investment and commodity prices. These adjustments, however, are almost complete. Growth in activity in the non-mining sector has risen gradually over recent years driven by low interest rates and the depreciation of the exchange rate since 2013.
OECD projections (November 2016) predict economic growth to pick up to 3% by 2018. The decline in resource-sector investment will tail off and the non-resource sector will be supported by a steady increase in household consumption and investment as wages and employment rise. Further falls in unemployment will help reduce inequality and are not expected to generate strong inflationary pressures. OECD Australia Economic Forecast
State by State differences
There are strong economic differences between the Australian States due to the effects of the end of the resources boom. The economies of the mining states – Western Australia and Queensland – have been most impacted. States with less exposure to mining – New South Wales and Victoria – have seen an improvement in economic conditions. The growth rate of household consumption reflects this. Consumption growth has generally been stronger in the non-mining states.
The unemployment rate is currently 5.9% (March 2017). According to the Reserve Bank, it will edge lower over the next two years with some spare capacity in the labour market. ABS Employment & Unemployment
The services sector is the largest part of the Australian economy - accounting for 80% of gross domestic product (GDP) - and is growing faster than any other industry. The mining and agricultural sectors continue to be a major contributor to Australian trade. Australia is also internationally competitive in many technologies and high-value-added manufactured goods.
Australia is very open to global trade and investment and has reduced tariff and non-tariff barriers both unilaterally and through negotiated trade agreements. Beneficial bilateral trade agreements have been negotiated and formalised with Japan (Jan 2015), Korea (Dec 2014) as well as other key Asian markets. Negotiations have been concluded on a China-Australia Free Trade Agreement. Other than a number of "sensitive" sectors, investment into Australia is open and supported. Mining and agriculture are important exports.
The Australian banking and financial sector is open, highly competitive and well developed. The banking sector is well regulated and performed well throughout the global financial crisis of 2008-10.
The Reserve Bank of Australia sets the Cash Rate Target which is the market interest rate on overnight funds. In August 2016 the cash rate fell 0.25% to 1.5%. The target cash rate is set monthly at the RBA's board meetings.
The Inflation rate is calculated as the Consumer Price Index (CPI) and reported by the Australian Bureau of Statistics (ABS) quarterly and annually. Inflation rose 2.1% over the twelve months to the March quarter 2017, compared with a rise of 1.5% over the twelve months to the December quarter 2016. The Australian government seeks to achieve a target inflation rate of 2-3% on average over the cycle.
Sovereign Credit Rating
Australia has a strong (AAA) credit rating by all three major rating agencies. As at June/July 2014:
- S&P: AAA
- Moody’s: Aaa
- Fitch: AAA
Moody’s noted in its June 2014 assessment, "Such economic resiliency is demonstrated by the country’s large size, economic diversity, and track record of solid economic growth. As one of the world’s most advanced economies, Australia has not only a significant natural resource sector, but also well-developed manufacturing and service sectors.
Australia has demonstrated a transparent framework for the government’s fiscal policy and has consistently kept government debt at relatively low levels", Moody’s said.
Reserve Bank of Australia (Central Bank)
Commonwealth Treasury of Australia (Finance Ministry)
Statistical data on the domestic economy including national accounts, labour force and CPI figures, can be found on the Australian Bureau of Statistics website
Australia and State Summary Trade & Economic Statistics, Department of Foreign Affairs & Trade