In this post I’d like to look at whether the Australian dollar is set to increase (i.e. gain value) in 2012.
This might be helpful if you’re emigrating to Australia, in which case you might also like to read about how to transfer money to Australia, and also, protecting yourself against foreign exchange losses by fixing the exchange rate.
Set to Increase?
If the Australian dollar is to gain in 2012 (against the UK pound in particular) it must overcome two important challenges that have emerged this year.
The first is the slowdown in China’s economy, where manufacturing has contracted several months on the trot, thereby cutting demand in Australia’s mining industry.
The second is to rebalance Australia’s economy away from mining, to retail and manufacturing which have suffered during the resources boom.
The Problem with China
To a large extent the first challenge is out of prime minister Julia Gillard’s hands.
China’s manufacturing is slowing down because demand in its biggest export sector – Europe – has collapsed in light of the Eurozone debt crisis. Since then, the government in Beijing has taken drastic steps to move China’s economy toward domestic consumption, but this will take time.
In the meantime, China’s manufacturing base could continue to shrink, in which case the Australian dollar is unlikely to increase in 2012.
Regarding rebalancing Australia’s economy, the government in Canbarra might have more success.
Julia Gillard recently passed a mining tax in Australia, meaning the government takes a big percentage of the revenue in Australia’s huge mining industry. These funds can be used in regions that haven’t benefited from the mining boom, to provide subsidies to manufacturing and retail (which have suffered a lot) and so create jobs.
If she succeeds, this might spur economic optimism in Australia, and so increase the dollar.
Get in Touch
So it’s possible the Australian dollar will increase in 2012, but not a sure thing. Against the UK pound for instance the emu dollar has lost two months on the trot at this point, meaning much must be done to get it climbing again.
I hope that answers your question.
If you want to know anything else about changing currencies, don’t hesitate to leave a reply in the box below. I’d be delighted to help.