Forecasting project During 1991, the economy of Australia was undergoing a period of recession but soon it saw unprecedented growth in its economy with an expected rate to be 3.7 percent. The growth enabled the Australian economy to 3.7 percent and unemployment to fall from 11 per cent to 5 percent. The growth has long-term beneficial effects on Australia’s economy as a whole. It also got privileged to have an economic boost from the main trading partner, Japan and the increasing and new markets of China and India gave them good platform for its exports of raw materials.
The export of minerals and metals in abundant quantity has enabled the Australian Dollar to reach at much stronger position as compared to other nations despite the fact that deficit is seen in the current account. The increase in the trade deficit is due to its continuous struggle with the industrial sector as compared to its competitive nations. And another challenge in front of Australia is inflation due to labour shortage. (Economics Help, Online) It is not surprising if it is said that the Australian dollar is fifth largest currency in trading in the world.
It is after the US Dollar, Euro, Yen, and Pound Sterling and accounts for 2% of total world output. It’s fifth largest on account of its close ties economically with Asia and its stable economy and to the commodity prices. The future of the dollar as suggested depends on the strength of commodity prices, interest rates and current account deficit. With the prices on the rise all over the world, investment of dollar would be best option. With the rise in interest rates and current account deficit, the Australian interest rate would also rise.
But it is also true that on account of the current account deficit, dollar could be devalued. (Economics Help, Online)To predict the future rate of Australian dollar as compared to other nations like United States, Euro, Japan, United Kingdom and New Zealand, and to see which of the nation is best prospect we should compare the current exchange rates in accordance with the models like Purchasing Power Parity (PPP), Fisher effect (FE), Unbiased Forward rate (UFR), technical analysis and Assets markets Approach.
Now, Euro is being considered as a dominant currency. As regards to one AUD Australia, Euro was 0.5921 and in AUD 1.70619 as on 18th August 2008. The Euro economy is showing the signs of quick growth with restrained inflation. The economic growth is currently stable at 2.5 per cent with the rate of inflation at 2 per cent. This enables a good platform for Euro to have a strong position. Currently the interest rates are at 4.66 per cent.
As regards GBP, currently 1 AUD equaled to 0.4668 GBP as on 18th August 2008. Sterling was looking absolutely right until the middle of the last week increasing the rates from $2.16 to $ 2.20 but as soon as week got over, it went down and pound rate dropped to $2.13. The trade continued between $ 2.13 and $ 2.16 and again opened at $ 2.14 by the first day of the next week. It was really a very bad week for pound. First of all it did not start well and then got even worse.
It owes to bad economic position. The Producer Price Index saw the gap got narrowed between the costs and the prices of the manufactured goods. There was deterioration in trade deficit and along with that the British Retail Consortium also saw the sales to fall to 1 per cent. (Moneycorp, Online) With the prices of soft, metals and energy getting lowered on Tuesday, Australian Dollar saw the 12th consecutive fall against the US Dollar. It was Aussie’s longest days of loss period since 1975.