Australia Country Profile - Economy, Currency, Central Bank, Canadian Dollar, CAD

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Introduction

Australia is the 15th largest economy with GDP valued at USD 755 billion, and a population of 21 million. The economy is dominated by services, though agriculture and mining industries play a very important role, with manufacturing trailing as an engine of growth. Commodities make up around 65% of Australia's exports, with Japan and China being the two largest trading partners. The interest rate is at 6.5%, making the Australian Dollar a target for carry trade, in which the yen's low interest rate is used to finance investment in the higher yielding Australian currency. High prices for commodities and carry trade have boosted the value of the Aussie in 2007.

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Australia's Fundamental Indicators and Chart

Monthly Data for January, 2009

Date	EST	Indicator	Actual	Forecast	Previous
1/1	5:50pm	Manufacturing PMI	33.7		32.7
		For December Provided by: Australian Industry Group (AIG) Official Release: HTML PDF From the Release: "Manufacturing activity fell for a seventh consecutive month in December. The Australian PMI® recorded 33.7 in December, an increase of 1.0 point on the previous month. Capacity utilisation fell to its lowest level in sixteen years. All components remained below 50 points indicating falls in the levels of each indicator. New orders and unemployment fell, though at a slower rate than in November, while production, inventories and supplier deliveries fell faster than in November. Wages, selling price and input cost price growth eased in December, while the fall in manufactured exports slowed over the month. Lower official interest rates and government spending measures, global and local, have yet to have an impact on demand for manufactures. The ongoing fall in activity reflects slower consumer demand, the weak construction sector and the impact of falling global demand for manufactures as reflected in international PMI measures. Manufacturing activity fell in all states, particularly in Western Australia and Queensland."
1/2	12:30am	RBA Commodity Index y/y	34.4%		35.0%
		For December Provided by: Reserve Bank of Australia Commodity Index m/m: pr. -2.7%, -4.6% (Oct), 0.7% (Sep), 2.0% (Aug), 3.6% (Jul), 7.9% (Jun), 6.1% (May), 9.4% (Apr)
1/5	5:30pm	Services PMI	39.3		37.8
		For December (s.a.) Provided by: Australian Industry Group (AIG) Official Release: HTML PDF From the Release: "Persistent weak demand lead to a ninth consecutive decline in services sector activity in December. The Australian PSI® rose 1.5 points to 39.3. The slight moderation in the rate of decline in services activity was largely due to softer falls in the property & business services and transport & storage sectors. This largely reflected a marginal improvement in the property market; demand for transport services in the lead-up to Christmas; and lower fuel costs. Sales, new orders and inventories all decreased at a slower rate in December, with the pace of job-shedding remaining broadly steady. Capacity utilisation rose slightly, while input cost increases moderated further."
1/6	7:30pm	Retail Sales m/m			0.2%
		For November (Trends Basis) Official Release: Australian Bureau of Statistics Retail Sales m/m (s.a.): pr. 0.7% (Oct), -1.1% (Sep), 0.5% (Aug) Retail Sales y/y (s.a.): pr. 2.0% (Oct), 1.6% (Sep), 3.5% (Aug)
1/6	8:00pm	New Home Sales			4.5%
		For November Provided by: Housing Industry Association
1/7	5:30pm	Construction PMI			32.0
		For December Provided by: Australian Industry Group
1/7	7:30pm	Building Approvals		-1.3%	-5.4%
		For November m/m (s.a.) Provided by: Australian Bureau of Statistics (ABS) Approvals y/y: pr. -26.0% (Oct), -21.6% (Sep), -8.6% (Aug), -3.7% (Jul), -7.8% (Jun), -0.4% (May), 5.2% (Apr)
1/7	7:30pm	Trade Balance		2.15B	2.95B
		For NOvember Release Provided by: Australian Bureau of Statistics Imports m/m: pr. 0% (Nov), 7% (Oct), -2.0% (Aug), 4.0% (Jul), -1.0% (Jun) Exports m/m: pr. 7% (Nov), 8% (Oct), 6.0% (Aug), -1.0% (Jul), 2.0% (Jun)

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Central Bank Watch - Latest Reserve Bank of Australia Decision

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December
1st, 2008

Actual

Forecast

Revised Form

4.25%

4.50%

5.25%

N/A

Provided by: Reserve Bank of Australia
Official Release: Statement

The RBA cut rates by 1%, bringing them to 4.25%, the lowest since December 2001. Though the Australian economy has weathered the financial storm slightly better than other economies, the slowdown is gaining steam. Therefore another large cut in the interest rate was warranted.

From the Release: "The Australian economy has been more resilient than other advanced economies, but recent data nonetheless indicate that a significant moderation in demand and activity has been occurring. With confidence affected by the financial turbulence and a decline in the terms of trade now under way, more cautious behaviour by both households and businesses is likely to see private demand remain subdued in the near term. With that outlook, and with capacity pressures now easing, it is likely that inflation in Australia will soon start to fall. Global disinflationary forces will assist in this regard, though the depreciation of the exchange rate means that the decline of inflation to the target could take longer than would otherwise have been the case.

Weighing up the international and domestic developments of recent months, the Board judged that a further significant reduction in the cash rate was warranted now, to take monetary policy to an expansionary setting. As a result of today’s decision, the cash rate will be at its previous cyclical low point. Given trends in money market yields, most lending rates should fall significantly and will also reach below-average levels.
There has now been a major easing in monetary policy over the past few months. Together with the spending measures announced by the Government, and a large fall in the Australian dollar exchange rate, significant policy stimulus will be supporting demand over the year ahead."

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