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Good news for the Australian economy as latest data defies expectations

By Smart Currency March 3rd, 2016

Good news for the Australian economy as latest data defies expectations

Positive economic data good news for Australia

 

Australian economic data performed better than expected in the last three months of 2015, despite the ongoing negative effects of lower commodity prices on the country’s oil and mining sectors, which have an important part to play in the Australian economy. The Australian economy actually grew by three percent from the previous year’s figures towards the end of 2015. Comparing growth quarter by quarter, this was up 0.6 percent from Q3, exceeding expectations from the markets, which were at 0.4 percent. This is thanks in the most part to positive figures from public spending, household consumption, and the construction sector.

There was also a considerable improvement in Australia’s exporting figures, at 1% compared to the previous results of -5%. Australia’s trade balance figures also offered positive signs of growth for the Australian economy, with results coming in at -2,937million compared to the figure of -3,524M previously. These positive data results are a hopeful sign for Australia’s economy, meaning that interest rates are not likely to be cut in the short term. Interest rates have remained at two percent for the past ten months in light of positive signs for economic growth. These positive outcomes have in turn had a positive effect on the strength of the Australian dollar, with the currency strengthening against major pairings such as sterling.

These positive data results are a hopeful sign for Australia’s economy, meaning that interest rates are not likely to be cut in the short term. Interest rates have remained at two percent for the past ten months in light of positive signs for economic growth. This in turn has had a positive effect on the strength of the Australian dollar, with the currency strengthening against major pairings such as sterling.

Australia has done well to ride out the downturn, having been hard hit in the past as a result of underperforming commodities. In the summer of 2015, the Australian dollar hit eight-year lows against sterling as a result of falling commodity prices. This rapid strengthening of sterling against the Australian dollar on 16th July, rising to 2.12, shocked the currency markets and caused significant losses for companies trading with Australia. In real terms, this meant that a transaction of 5,000,000 Australian dollars on that day represented a loss of £33,854 compared to the same transaction made the previous day, when the rate sat at 2.09.

Yet it is not all rosy: key business sectors in Australia such as tourism and technology found that they were boosted by a weaker Australian dollar. Mining, a sector that is also important to the Australian economy – and is currently struggling under decreased demand – also benefitted from these lower exchange rates. Despite these challenges, Australia remains with its head above water and is keeping up its considerable contribution of global exports of energy resources.

Written by Rachael Kinsella | 03/03/2016