All Articles

THINK Australia: Outlook for the Aussie dollar


The Australian economy is going through a change in growth. Harry Tan (Head of Research, Asia-Pacific) discusses its future.

The end of the global commodities bull cycle, which partly reflects the softening growth in China and other emerging markets, has dampened and re-distributed economic growth during the past 2-3 years. The slowdown in China, which accounts for about one third of Australian exports, has overshadowed external demand. Lower commodity prices and the drag on growth from falling mining investment (c.1% reduction from GDP growth each year), have led to downward pressure on Australia’s fiscal position. Furthermore, growth has moderated as a result of the recent regional slowdown, having benefited from the rising interdependence in trade and investments with Asia over the past decade.

That said, the economy ended 2015 on a relatively strong note and is rebalancing away from mining-led growth. Australia is benefiting from a lower cash rate and weaker currency. Economic indicators have shown lower interest rates translating into stronger consumer cash flow, which has then helped to underpin the ongoing housing construction cycle. The depreciation of the AUD/USD (from 1.1 to around 0.7 presently) has helped ease import competition faced by domestic producers, while boosting activities in key export sectors such as agriculture, tourism and education.

After recording 3.6% GDP growth at the peak of the current growth cycle, GDP has averaged 2.9% during 2014-2015. Growth prospects are expected to remain relatively strong during 2016, where it is projected the economy will expand by about 2.7%. It will further gain momentum heading into 2018, with averaged forecasted growth over the next five years running at about 2.8%.

Read the full report

Issued by TH Real Estate (Australia) Limited. ABN 98168690.AFSL 460770. TH Real Estate (Australia) limited provides investment products and service. This document is intended solely for the use of professionals and is not for general public distribution. Any assumptions made or opinions expressed are as of the dates specified or if none at the document date and may change as subsequent conditions vary. In particular, the document has been prepared by reference to current tax and legal considerations that may alter in the future.The document may contain "forward-looking" information or estimates that are not purely historical in nature. Such information may include, among other things, illustrative projections and forecasts. Thereisno guarantee that any projections or forecasts made will come to pass.International investing involves risks, including risks related to foreign currency, limited liquidity particularly where the underlying assetcomprises real estate, less government regulation in some jurisdictions, and the possibility of substantial volatility due to adverse political, economic or other developments. Past performance is no guaranteeof future performance. The value of investments and the income from them may go down as well as up and are not guaranteed. Rates of exchange may cause the value of investments to go up or down.Any favourabletax treatment is subject to government legislation and as such may not be maintained. The valuation of property is generally a matter of valuer’sopinion rather than fact. The amount raised when a property is sold may be less than the valuation. Nothing in this document isintended or should be construed as advice. The document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. TH Real Estate is a name under which Henderson Real Estate Asset Management Limited provides investment products and services. Issued by Henderson Real Estate Asset Management Limited (reg. no. 2137726), (incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3BN) which is authorised and regulatedbythe Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored. COMP201600100

Harry Tan

Harry Tan

Head of Research, Asia Pacific

Harry's biography