Thursday, June 13, 2013

AUSTRALIAN DOLLAR GROWTH

Australian dollar growth The periods of the recent past has witnessed the rise in the growth of the Australian economy because of the measures and policies that have been enacted in the region. With the enactment of these policies, the Australian has grown and developed to be characterized as one of the significant economies across the globe. Analytical records have classified the economy of Australia as one of the largest capitalist in the global regime with high GDP of U.S. $1.57 trillion ('Economic forecast' 2012). The development of the service sector has been immense and it contributes 68% of the national economic development while the mining sector only contributes 10% of the GDP (Stokes, 2012). In the wake of these developments, Australian dollar has received greater consideration in the global market because it has been identified as the 5th traded currency that accounts for 7.6% of the global daily share of foreign trade. Further records form the market has stated that trades prefer the usage of Australian dollar because of the prevailing high interest rates in Australian market. Another factor that prompts this realization is the prevalence of high freedom of the foreign exchange market from the elements of government intervention (Stokes, 2012). Other factors that have necessitated the rise and development of the Australian dollar include the long-term stability of Australian political economy and the economy in general and this is further coupled with the increasing aspects of diversification of the market. Finally, with the increase in the attributes of development, the Australian dollar has continued to appreciate at higher rates concerns have been raised concerning the provisions rate of appreciation of the Australian dollar. The increase in the global development has further resulted in the aspect of increased operations between the national economies and this has initiated the high rates of exchange on the trade-exposed sectors of the economy. According tot eh information from the market watch, the rise in the Australian dollar has been very essential for the Australian economy because it has continued to attract foreign investment. Some of the factors that have necessitated the rise in the Australian dollar have been identified as follows. Australian economy has outperformed other advanced economies Over the period, the conduction of the market survey has listed the economies of United States, china, Britain and Japan as some of the most advanced economies of the world. The listing of these economies as the leading economies in the world has had an effect in the growth of their currencies because they have increased their participation in the global market. Advanced economies have the capacity to benefit from the attributes of global trade. In reality, the economy of the United States has often been identified as the leading global economy in terms of development (Ali & Rahman, 2012). This has enabled the usage of the U.S. dollar as the global currency and the performance of the currency have been compared with that of the dollar. In the view of this realization, the establishment of increased economic growth in the Australian economy has been remarkable because the growth in Australian economy has struggled to offset the growth in other developed economies. The increase in development of these economies has further resulted in the attribute of increased currency development and further enhanced the consideration of increasing the aspect of economic benefits. The development of these development data regarding Australian has been essential (Ali & Rahman, 2012). The data has confirmed that the development of the Australian economy has outperformed the growth of other leading global economies across the globe. In support of this realization, the market watch has stated that the Australian economy has experienced significant rise in the reduction of unemployment rates. The reduction in the rates of unemployment is one of the factors that largely lead to the increase in the growth of the GDP. The data from the Australian economy has shown that the economy created a total of 50100 jobs and this has had immense impacts on the development of economy. In this regard, the rise in employment rates is beneficial for the economy because it results in the increase in national income and consequently, the GDP (Nash, 2013). The consideration of these developments is essential because economic growth enhances the strengthening of the national currencies. In the view of this development, Australian economy has continued to increase its attributes of development thereby emerging as one of the advanced economies in the world with high stable and appreciating currencies. Higher interest rates In the wake of the development in the Australian economy, the economic planners have set the official rates of interests higher than those of other economies because of the capacity to attract more investment opportunities. The development of this factor has ensured that the Australian economy experiences increased growth and this has resulted in the increase in the development of the service market. The record from the Australian market has shown that the service sector contributes 68% to the national gross domestic product and this has continued to develop (Nash, 2013, Grisse & Nitschka, 2013). The increase in global development and has also enhanced growth and development of the Australian economy. Certainly, the development of high interest rates in the market is very essential and has been largely associated with the increased investment opportunities in the market. Interest rates are essential tools in the economy that are used by both monetary and fiscal planners to spur investments in the economy. In this regard, the economic planners in the economy of Australia have enacted measures to ensure that the rates are kept higher to attract both local and international investors (Grisse & Nitschka, 2013). In reality, the Australian market has continued to attract investors from across the globe because of the high rates of returns that investors derive from their investments. The increase in investments has helped in strengthening the economy and further helped in the stabilization of the dollar. The depiction of the graph below highlights the fluctuations of the dollar relative to those of other advanced economies. Source (Stokes, 2009). Positive Balance of trade The records of the analysis from the Australian market has highlighted the maintenance of ideal balance of trade has also contributed towards the strengthing of the Australian dollar against that of the United States and the sterling pounds. Balance of trade refers the aspect of balancing the elements of imports and exports. Most developed nations are engaged with the capacities of increased development of the exports (Stokes, 2009). According to the macro economies, positive balance of trade is achieved when the country exports more commodities than it imports and this is essential because the nation derives significant amount of income. The recent records from the Australian economy have shown that the economy has a trade surplus of AUD$307 million dollars according to the survey conducted in March 2013 (COFNAS, 2012). Over the period, the Australian market has continued to operate under surplus balance of trade and this has been identified as one of the factors that enhance trade and development. The economy of Australia exports services and other commodities like minerals and agricultural products to the foreign nations and this capacity is use din increasing the amount of income. Furthermore, the country export ideal amount of commodities to the developed nations like china and the United States. Concerns for the rising dollar rates in Australia The rising rates of the Australian dollar have continued to have mixed reactions in the economy because there are both benefits and disparities associated with the rise. The farmers in the Australian market have witnessed the emergence of rising disparities and this has been associated with rise in the Australian dollar compared with those of the U.S. dollars. The survey conducted in the Australian has shown that the farmers are getting concerned because of the easing commodity prices in the international market. The strengthening of the Australian dollars has resulted in the aspect of devaluation of the Australian commodity exports and this result in the reduction of commodity earnings. The agricultural products traded oversee are traded in the U.S. dollars before being converted into the Australian dollars and this is detrimental because the earnings of the Australian dollars is highly reduced. Majority of the Austrian farmers (90%) rely on the foreign income of their trade and this results in the derivation of high inputs while reduced income and this results in detrimental effects in the economy (Richardson & Ward, 2006). In view of the strengthening of the Australian dollar, the Australian agricultural sector has faced critical concerns that has ensured reduction on global competition and hence the call for the reduction of the Australian dollar. Policies to reduce the growth of Australian dollar The recent advancements made by the Australian dollar in the global market have been characterized by the development of both detrimental and positive effects. However, analytical records have shown that the market is characterized by the reduction in performance of the key sectors and therefore, the policies to reduce the activities of the dollar have been enacted. The reserve bank of Australia is concerned with the realization of the financial well being of the economy and this has resulted in the development of the incentive to employ interest rates cut in the economy (Apostolou, 2011). The enactment of this policy in the economy is aimed at enhancing the attributes of development that includes increasing the operations of the stock market and increasing the operations of international trade. In order top ensure reduction in the growth of the currency, the Australian RBA bank has reduce the prevailing interest rates in the economy with the view of reducing the rates of dollar appreciation in the economy. The implication of the cuts in interest rates has trimmed the cash rates seven times since its enactment in late 2011 and it has also resulted in the fall in export prices. The operations of the international market are based on the movement of the commodities and factors from other markets. In this regard, various leading global markets have initiated plans to enact policies that will ensure reduction in the rates of the Australian dollar and this has been achieved through the increase in the collaboration of the developmental factors. Specifically, the Chinese market has employed control measures because it is the leading export destination for the Australian exports (HELY, 2012). The Chinese currency and other leading currencies have enacted policies that necessitates the fall in their currencies. In return, the Australian economy has also received a fall in their currencies and this has served the purpose of reducing the rates of growth that has been associated with the Australian dollar. The policy of cutting down the interest rates has been viewed to be common for the global market and the leading market participants have enacted measures to ensure reduction in their interest rates. The consideration of interest rates cuts that have been experienced in the leading global market participant are United States, Europe and Japan (HELY, 2012). These economies have lowered their rates of interest to ensure that the developments of the economic sectors are adequately enhanced and this is essential for the enactment of growth and development of the economies. Conclusion Finally, the establishment of economic development is the motive of the national economic planners and they enact various measures to ensure that these goals are achieved. Specifically, the Australian economy has enacted measures to initiate development and the economy has grown and developed to become of the advanced economies in the world. In the wake of this development, Australian currency has experienced more growth in the recent past and it has offset the currencies of the leading global participants. This aspect is both beneficial and detrimental for the economy of Australia. Some sectors of the economy like agriculture have been adversely affected while imports have been favored. The policy to control this aspect is the interest cuts that have been employed by the RBA to ensure that the growth of Australian currency is controlled. References Ali, M, & Rahman, S 2012, 'Influence Of Australian Coal Export On A$/US$ Exchange Rate: A Longitudinal Study', International Business & Economics Research Journal, 11, 4, pp. 397-406, Business Source Complete, EBSCOhost, viewed 9 May 2013. Apostolou, N 2011, 'the great australian escape', Charter, 82, 8, pp. 34-38, Business Source Complete, EBSCOhost, viewed 9 May 2013. COFNAS, A 2012, 'Top three forex opportunities in 2013', Futures: News, Analysis & Strategies For Futures, Options & Derivatives Traders, 41, 12, p. 53, Business Source Complete, EBSCOhost, viewed 9 May 2013. 'Economic forecast' 2012, Country Report. Australia, 16, 4, pp. 7-10, Business Source Complete, EBSCOhost, viewed 9 May 2013. 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