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September 7th 2005

Australian Dollar buoyed by strong economy

The flagging Australian Dollar received a boost from the release of certain economic data, which seemed to paint an upbeat picture of the Australian economy. Australia recorded real GDP growth of 2.7%, marking the 14th consecutive year of economic expansion. In addition, Australian companies are realizing record profits, which they have promptly reinvested to drive growth. Coupled with falling energy prices and low levels of inflation, increased corporate investment signals Australia’s economy is in excellent shape. Forex traders reacted positively to the economic data and the subsequent decision by the Bank of Australia to maintain interest rates at current levels. The Financial Times reports:

The news, combined with Wednesday’s decision by the Reserve Bank of Australia, the central bank, to hold interest rates steady, helped nudge up the Australian dollar toward 77 cents against the greenback, outperforming other major currencies.

Read More: Australian GDP boosted by corporate investment

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Posted by Adam Kritzer | in Economic Indicators, Major Currencies | 3 Comments »

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3 Comments of “Australian Dollar buoyed by strong economy”

  1. Stephen Kirchner Says:

    The most remarkable feature of the Q2 release was the large wedge that the stunning double-digit growth in Australia’s terms of trade has driven between the gross domestic product and income accounts.
    Gross domestic income rose 2.4% q/q compared to the 1.3% q/q rise in GDP. GDI better captures the welfare gains arising from the increased purchasing power of domestic production that flows from an improved terms of trade. It also puts the current account deficit in perspective, by showing the enormous welfare gains from substituting low cost imports for domestic production.
    Needless to say, the economic Armageddon that was supposed to be unleashed by falling house prices is nowhere in sight. No doubt weakness in house prices has further to run and will have a small negative wealth effect. But the dwelling investment cycle appears to have turned already, with both dwelling investment and ownership transfer costs making positive growth contributions in Q2.

  2. Mike Says:

    Australian Dollar with his volaty always came in well currency for reception of the profit.

  3. JW Says:

    Some great info here

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