The Australian Dollar Crisis

In simple terms, people who may have a demand for the Australian dollar could include:

By 2016, Australia assess that mining had raised genuine per capital household extra income by 13%, raised genuine wages by 6% and brought down the unemployment rate by around 1¼ rate focuses. There have additionally been cost. The mining has prompted a huge valuation for the Australian dollar that has weighed on different enterprises presented to exchange, for example, assembling and farming.

Because Australia has a floating exchange rate, the currency’s value is left to be determined by the market forces of international demand and supply. There is no specific measure of exchange rate volatility. Economists instead refer to movements in Australia’s bilateral exchange rate or movements in Australia’s TWI to demonstrate exchange rate volatility. Since floating in 1983, Australia’s exchange rate has been remarkably volatile. This has been seen especially in the past six to seven years, where the Australian dollar has appreciated substantially against the US dollar, from record lows in August 2001 of US48 cents

The Australian economy marks external stability as an important objective because it can influence other important aims such as economic growth, unemployment and inflation. External stability is the concept of sustaining a nation’s external accounts so that in the future, it is able to service its foreign liabilities and can avoid currency volatility. When looking at external stability, we must examine Australia’s balance of payments, which records all economic transactions between Australia and the rest of the world. Australia’s balance of payments has two components, which is the current account and the capital and financial account. The current account measures the receipts and payments for trade in goods and services, transfer payments and income flows, while the capital and financial account shows international borrowing, lending, purchasing and sales of assets.

- In 1983, Hawke floated the Australian dollar so its value was set on the world exchange rate.

Started from late 1800s, Australian mining boom is an inevitable part of modern Australian history. From gold and copper to iron and gas, the several terms of mining boom made great contribution to Australian community and economy including providing source of employment, attracting immigrants and stimulating international trading. The mining boom is considered to be a shock to the Australian economy.“This combination of shocks has boosted the purchasing power and volume of Australian output. It has also led to large changes in relative prices, most noticeably an appreciation of the exchange

Analyse the effects on the Australian economy of a sustained reduction in the cash rate with particular emphasis on the housing market.

Australia’s economy over the past decade has improved steadily. Over the 2004 – 2013 period, the GDP averaged at USD1.05 trillion1 and rise in GDP per capita from USD30,449 in 2004 to USD67,4732 in 2013.

Introduction: What factors affect the demand and supply of Australian dollars in the foreign exchange markets? Distinguish between the possible causes and effects of currency depreciation and a currency appreciation on the Australian economy. What forces have come into play, if any, in the past four months that have affected the value of the Australian dollar?

GDP growth, unemployment figures, inflation rates and money aggregate figures are important interrelated indicators that can help to determine the health of the Australian economy. The patterns evident in these indicators represent practical expressions of economic health and can be seen as the result of action taken by the Reserve Bank to achieve the three key objectives:

The main issue in the article is the decline of the Australian dollar against the US dollar. Upon perusing it is understood that the Australian dollar is steadily declining during the current year. The economists said that this is due to the fall of commodity prices globally. The Australia is agriculture and resource based economy, and the Australian dollar heavily depends on commodity price and terms of trade. According to the IMF the reason for the falling commodity prices is the slowing of demand globally. It’s mentioned that Australia, Canada and New Zealand are the three of the worst performing currencies of 2015. In order to stimulate economy the Reserve Bank of Australia is planning to cut its rate to 1.5% before March 2016 to deal with lower GDP and low domestic demand that is increasing unemployment. Mining investment has slowed down, which reduced the value of iron ore, causing Capital imports to fall in Australia. If the dollar declines too far, then Australia’s import will be reduced and this is difficult for businesses. Another nail in the coffin for the Australian economy is the plan to raise the rates of UK and US which could further decline the value of AUD.

Analysis: This article states the factors that are affecting australia’s inflation which is the distribution of national income and wealth, individual welfare and household. National Australia Bank (NAB) economists said a 0.6 per cent quarterly underlying rate of inflation was consistent with the reserve bank’s forecast of 2.25 per cent for underlying inflation in the year ending June. The figures came in right on expectations. Economists surveyed by AAP had forecast an annual rate of inflation of 1.3 per cent, and a quarterly increase of just 0.2 per cent. “Even though underlying inflation was also low, there were no signs of it slowing too much further

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.

Like the other currencies mentioned in the report, the Japanese Yen (¥) also adopts a floating exchange rate. As this is a short term forecast of the Australian Dollar (AUD) against the Japanese Yen (JPY), a chartist approach will be taken to analyse the movements of the two currencies. The technical method and the effects of the government are the topics that will be analysed for this short run forecast (Moffett et al, 2006 p.136). As of the 1st of September 2010 the Australian Dollar $1 = Y75.93.

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.