Better Understanding of the Australian economy and AUD

0

This post is also available in: فارسی (Persian)

 

By: Ahura Chalki

Country overview

Australia, officially the Commonwealth of Australia, is a sovereign country comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands. It is the largest country in Oceania and the world’s sixth-largest country by total area. The population of 26 million is highly urbanized and heavily concentrated on the eastern seaboard. Australia’s capital is Canberra, and its largest city is Sydney. The country’s other major metropolitan areas are Melbourne, Brisbane, Perth, and Adelaide. (Wikipedia)

A wealthy country, Australia has a market economy, a high GDP per capita, and a relatively low rate of poverty. In terms of average wealth, Australia ranked second in the world after Switzerland from 2013 until 2018. In 2018, Australia overtook Switzerland and became the country with the highest average wealth. (Wikipedia)

The currency

AUD (Australian Dollar), known as “Aussie” or “Ozzie” as well, which is the currency of Australia, Christmas Island, Cocos (Keeling) Islands, and Norfolk Island, independent Pacific Island states of Kiribati, Nauru, and Tuvalu. AUD as one of most important currencies in the world depends on the economy and many other important indexes. We will review most important of them and then we will get the point that how to analyze and understand this currency.

The most important Economic Indexes of the country

GDP: Australian GDP in 2018 was 1,418,280 M. $, 2.7% while GDP per capita was 56,352$, 0.7% comparing with 2017, 1,386,360M. $, 2.8% and GDP P.C, 55,958$ and 7.7%, respectively (countryeconomy.com). “Statistics times” website ranked Australia as a Fourteenth economy after Russia and Spain and before Mexico.

Interest rate & Inflation Rate: Checking the RBA website shows that Australia started 2019 with a 1.5% interest rate while after the concerns about economic growth RBA with dovish policy, started to cut the rate in three months in a row at May, Jun and July, 25bp each month, to bring that to lower record of RBA history to 1%, for now policy is to keep it in the same rate. Measures of Consumer Price Inflation at its latest update at RBA website was 1.6% at 31. July 2019, the year ended percentage change number.

               Industrial production and Employment: Industrial production in the latest update at July 2019, was 1.9%, (ceicdata.com). Australian 5.3% unemployment rate steady as economy surprises with 40,000 extra jobs, as “abc.net.au” reported in August 2019.

               Australia is the 20th largest export economy in the world and the 59th most complex economy according to the Economic Complexity Index (ECI). The top exports of Australia are Iron Ore (20%), Coal Briquettes (19%), Gold (12%), Petroleum Gas (8.3%) and Wheat (2%) (OEC.world), mostly to China, Japan, South Korea, India, and Hong Kong, respectively. On the other hand, most imports are Cars (9.1%), Refined Petroleum (7.2%), Special Purpose Ships (4.5%), Broadcasting Equipment (3.6%) and Delivery Trucks (3.4%), from China, United States, South Korea, Japan, and Thailand (OEC.world). Generally, China, Japan, the United States, and South Korea are Australian largest Trading Partners. As of July 2019, Australia’s trade balance was $7,268 million (Australian Government, Department of Foreign Affairs and Trade).

            

               What mostly move AUD?

               AUD, one of the top 5 traded currencies, like any other currencies in the world being control, or at least directly influenced by the central bank of the issuing country. For AUD, it is the Reserve Bank of Australia (RBA). RBA, like any other reserve banks, has the mandate to control the inflation rate, which taken so seriously by RBA, in Australia.

In a general conclusion, to a better understanding of AUD moves, we need to focus mostly on:

(I) Export index, and mainly Iron Ore and Coal Briquettes, the most important determinants of Australian GDP and Trade Balance. That’s why actually AUD is well known as a Commodity currency.

(II) RBA meetings and minutes, especially about Interest Rate and Inflation data.

(III) The economic situation of main trade partner countries and important neighbors, especially China and New Zealand.

(IV) Unemployment rate and consumer confidence index, as they so deeply depend on each other.


Risk Warning: Trading-Leveraged Products such as Forex and Derivatives may not be suitable for all investors as they carry a high degree of risk to your capital. Please ensure that you fully understand the risks involved, taking into account your investment objectives and level of experience, before trading, and if necessary, seek independent advice.

LEAVE A REPLY

Please enter your comment!
Please enter your name here