The Australian Dollar Crisis

The figure obviously had not return to pre-crisis level. Moreover, recent commodity prices had fallen significantly which will affect Australia’s short and long term economy.

Between 2000 and 2016 Australia underwent the most dramatic mining increase because the Victorian gold rush. Investment in the sector, widely defined, quadrupled. The additionally fuelled growth in a huge vary of industries servicing the sector, in particular engineering construction and business services.

The decline in the CAD has been affected by what is happening to the nation’s levels of saving and investment. The level of Australia’s national

Australia has also experienced a rising terms of trade to 130.0 in late 2011 due to the commodities boom as a result of the industrialization of the BRICs, whereby Australia has experienced high export and national income, but has resulted in less competitiveness in other sectors due to the high AUD, causing the ‘Dutch disease’ whereby non-commodity sectors lose competitiveness. Similarly is can be seen in its narrow export base whereby in 2012-13 one third of export revenue came from coal and iron ore ($96 billion from 300 billion), furthermore 57% of Australian export revenue is made up of mineral and energy exports, whereby Australian growth has been largely fuelled by commodity exports and mining boom.

The Australian PMI has been mostly below 50 with an average of 47.98 in past 12 months and an average of 47.94 this year, which suggests a likely contraction in manufacturing. Fluctuation is expected due to its volatile nature but a large percentage change is likely to drive the economy. A 14.03% growth in July is expected to lead to an increase in the coming month but contraction may continue in 2015-2016. From these PMI figures, Australia’s economy might not be performing at its best. The industry might suffer

This growth rate was primarily driven by high consumer spending supported by both government spending and rising employment levels. According to a report by the Australian Bureau of statistics, consumer spending contributed to two thirds of GDP growth in the fourth quarter. This came despite a fall in income levels as Australian residents used their savings for spending purposes, and was also helped by a booming real estate sector which was the largest contributor to the GDP growth in the fourth quarter. (Mehta, 2016). As can be seen in Fig.4 below, consumer spending in australia increased to 231332 million in the last qtr of 2015 from 229576 million in the third qtr of 2015.

The Australian economy is playing a crucial role in terms of global economy. Based on the government’s analysis, Australia has been placed at the top 20 for the world’s largest economy. This caused a lot of economists to pay attention to Australia’s performance. Economists use macroeconomic objectives to analyse the national economy. This essay will focus on two macroeconomic objectives, how they are measured, and how they relate to each other. Furthermore, it will also discuss Australia’s performance over the past three years (2013-2015) and predictions concerning Australia’s performance in terms of these objectives in 2016.

It is said that we are living in turbulent times. The Australia’s once-in-a-century commodity boom has reversed, leading many miners to cut back on investments and consolidate; which is expected to generate great social and economic hardship throughout these years. While more hope is casted into the construction sector, a cooling change blows in the housing market. Unemployment is tipped to rise and when it reaches a record high; consumption will continue to grow at a below-average pace, so business sentiment will remain fragile. Rather than fuelling the economy, the fiscal policy keeps straining it whilst the monetary policy will struggle to have an impact – indicating that the Australian economy is slipping downwards.

The Australian economy has continued to grow at a moderate pace and activity is rebalancing away from the resources sector towards non-resource sectors. Even though the available data suggest that GDP continued to grow at a below-trend pace over 2016, employment growth was above average and the unemployment rate fell by around ½ percentage point. In part, employment growth appears to have reflected the relatively strong growth of output in the more labour-intensive sectors of the economy, such as household services. Growth of goods-related production has picked up more recently, but remains modest overall.

2011). A depreciating Australian currency is potentially inflationary, the depreciation of the Australian dollar lead to high Australian inflation rates, it cause a loss of export markets and reduce demand for Australian currencies. In this way, Australia’s inflation rates and costs are higher than its overseas competitors, at the same time domestic goods in Australia would be more expensive (Edge, K 2009). As well as inflationary pressures in Australia will increase, as imports would now be more expensive. This may increase pressure on the RBA to raise interest rates to defend its inflation target. With the result that Australian multinational corporations would cause it lost their overseas’ markets and customers, profit which from overseas would be decline and also pay for more interest

Booms, busts, recessions, and growth; all of the preceding terms are characteristics of a typical market economy. There are times when an economy can flourish spectacularly and there are times when it can fail miserably. Consequently, it is the responsibility of a nation’s central bank to manage these fluctuations through conducting effective monetary policy. The following paper will assume the perspective of the Reserve Bank of Australia (RBA) and critically analyze the past, present, and future of the Australian economy while considering specific sectors.

There are three major economic factors that have combined contribution to FMG’s growth over the past 5 years, including the strong AUD , the amazing export feature due to the Chinese boom which drives up the commodity price and the interest rate decision by RBA. Australia dollar has appeared strong for the past 5 years and maintained at $6-$6.8 level for AUD/CNY at most time. It promised a high level of foreign income for Australia exporter. In 2009, China demanded almost 60% of the world’s iron ore to produce 47% of world’s steel production. It contributes the most to the price rocket from $31.78 to $180.6 US cents/mts in 5 years time. In addition, Australia borrowing cost remains high over the past few years which may alter the finance decisions of FMG.

The Australian Dollar (AUD), or “Aussie” for short, is the official currency of Australia. Its symbol is the same as the US Dollar, $. Exchange rate movements are commonly discussed in terms of US Dollars per AU Dollars (USD/AUD) or British Pound Sterling to AUD (GPD/AUD). While the Australian economy is only the 12th biggest economy in the world by nominal GDP, according to the Word Bank website, the AUD is the fifth most traded currency in the world by value (“GDP Rankings”, 1). The AUD was initially introduced in 1966 after the official Australian currency being the British Pound Sterling since 1825 and the Australian Pound being pegged to the British Pound Sterling from 1910 to 1966 ("Museum of Australian Currency Notes”, 1). In 1966 the AUD was finally introduced, but was pegged to the USD in 1971 at a rate of between 1.1 and 1.4 USD/AUD, on average. The Australian Dollar was finally floated in 1983 ("Museum of Australian Currency Notes”, 2). There is no more direct reliance on any other countries currency.

As per the study done by Parliament of Canada, The Canadian dollar since the mid-1970 to the start of 1988 had been decline with respect to the US dollar. However starting in 2001, the Canadian dollar has encountered an amazing inversion of fortune against its US partner. Worth 62.5 pennies US in April 2002, the Canadian dollar moved to over US$1 toward the end of September 2007 and came to a current high of US$1.09 on 7 November 2007.Canada has kept up a traveling exchange standard since that time. Since the mid-1970s, in spite of, the Canadian dollar has encountered a decline with respect to the US dollar. In 1976, the Canadian dollar was exchanging at about standard with the US dollar, however tumbled from about US$1.01 to 76 pennies US throughout the following 10 years. This pattern was switched briefly in the late 1980s and mid 1990s, when the dollar ascended from a

Many seem to believe that AUD/USD and gold is the most important correlation to follow in 2017. While it’s prominence can’t be denied, AUD/USD and silver actually carries more reliability. Australia has huge mining resources and output, thus its economy is tied into the industry on a large scale. Most probably aren’t aware of the fact that mining actually equates for more than 2% of the nation’s employment. On top of that, mining contributes to approximately around 35% of the nation’s exports. What you can take from this is that shifts in the silver market can heavily impact the performance of the AUD/USD.