Australian currency has a solid reputation.
In this current global situation of changing market values and share indexes it is hard to write anything conclusive about Australian currency rates because we are aware that everything could be different in as little as a week.
However if you are planning a holiday in Australia; an investment in the Australian property market or are looking to live in Australia then a few basic guides to Australian currency and exchange wouldn’t go amiss.
Australian Dollar
The Australian dollar is the sixth most traded currency in the world, the top five being the US dollar, Euro, Yen, Pound Sterling and the Swiss Franc. It has a reputation in the market for being strong, largely thanks to the trading partnerships it has with Asian economies and the USA, the high interest rates in Australia and the stability of both the Australian economy and the government.
Unlike most other countries, the value of the Australian dollar tends to slump when domestic spending overtakes export earnings and rises when there is a boom in exports. The global economy as a whole tends to work in the opposite way as when there is an export slump, traders switch the value of the falling stock into cash, giving that currency a boost.
The Australian dollar is also tied in very closely to the euro, so whilst the Euro was struggling, stock markets saw a drop in the Aussie dollar. However for the moment at least, concerns over the Euro seem to have eased, pushing the Australian dollar up. Yet worries about the state of the Eurozone still abide. If Germany decide not to bail out debt-ridden countries but to exit the Euro instead, then we could see the Eurozone crumble, which would be disastrous for the Australian dollar.
Halo Financial services explains how the problem of Greece could have a bearing on the Australian dollar: “Fears over the Greek debt crisis might be half a world away from Australia but the dampening effect this is having on the recovery of the global economy will have an effect on the performance of the Australian exporters. Traders and investors remain nervous and the report by AXA is being viewed with interesting as they see the end of the Eurozone as the inevitable conclusion of the current crisis.”
However even if this were to happen, the strength of the Australian dollar is not to be underestimated, they could still surf the waves of any Euro crisis as Halo explains: “If investors start to feel more confident, they will buy the Australian dollar for the increased yield and borrow the money to do so elsewhere. These ‘carry trades’ are the major factor in the current strength of the Australian dollar.” Which, put plainly, means that they will buy the dollar at a low price on the basis that the dollar will recover, prices will rise and they can sell at a much higher price. This confidence in the Australian dollar will help strengthen the dollar should the worst happen.
Australian Economy
Australia has always had a reputation for having a strong economy. In 2009 the economy of Australia represented around 1.7% of the world economy, making it the 13th largest national economy. In fact when the rest of the world was experiencing a global recession, Australia’s economy continued to grow at an average annual rate of just over 3%. This is put down to the strong export ties Australia has with the Asian and American markets. Australian agricultural and mining industries account for 57% of the nation’s exports and this continues to grow as large mining companies invest more in regions such as Western Australia, a place that is rich in gas and oil reserves. Australia also exports wheat, wool and minerals.
Western Australia is experiencing a mining boom.
Australia’s service industry has also continued to grow, with Australia experiencing a boom in the property market. Many foreign investors continue to buy property and business in Australia but some critics say that this makes it impossible for native Australians to get on the property ladder. There are also worries about consumer and household debt in Australia and the continuing increase of house prices compared to income. A scenario that sounds very similar to the situation in the UK just before the recession, when borrowing was at an all-time high. However the banks in Australia are noted for their stability and follow strict guidelines on lending.
Just recently there were fears for investments in Australia after the controversial mining tax introduced by Prime Minister Kevin Rudd, however the PM appears to have done a fair bit of backtracking since then and the proposals for the mining tax have been watered down considerably.
Australian exchange rate
As the Australian dollar remains strong, visitors to Australia are finding that their money isn’t going as far as it once did. In fact the Australian tourist industry are finding that whilst visitors figures for Australia rose slightly – up by 6% in the first half of 2010 compared to the same period last year – spending is still down. This is due to a strong dollar against other weak currencies which reduces visitor buying power.
If you are able to plan ahead, the advice is to buy your currency at a time when the dollar falls slightly, as it did with the Eurozone crisis. If the Eurosceptics’ advice is right, then the Euro is set to fall further which may push down the Australian dollar too. So keep your eye on the markets.
If you are in the UK and planning to travel to Australia, the easiest place to go for your currency, and one that offers a reasonable rate of exchange, is the Post Office – although you may have to order your currency up to a week in advance. Beware of those who advertise commission-free as often the exchange rates will be worse to make up for it. Try to seek out the lowest commission as well as the best exchange rates. The places to avoid are the currency exchange stalls at the airport as the exchange rate of these is much worse than on the high street. If you want the convenience of airport pickup then order it online first and collect it at the airport as you’ll get a much better deal. Oh and always try to pay cash for your currency as you may be charged for using your card, some banks will not treat the currency exchange as a UK transaction and so will add fees on top of what you are paying.
Using your plastic in Australia
If you don’t want to use your plastic in Australia but don’t want to carry around a large amount of cash either then you can get a pre-paid card. You top it up with cash and use it in shops and restaurants like a credit card. The best advantage of this is that if you lose it, for around a £10 charge your provider will replace it with your funds intact.
If you are using credit or debit cards in Australia then beware of hidden charges. Cash withdrawal fees for both cards will apply as well as interest charges and even charges for currency exchange. Check with your provider what the charges will be before you decide to use your cards.
For up to date currency exchange rates and currency converters there are a number of websites you can visit and we’ve listed just a few of them below.
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