Australia sees signs of ‘Dutch Disease’

THE Eurozone crisis continues to dominate the markets as the Aussie recovered from its weakest trading day on Tuesday where it closed out at 1.612GBP/AUD. The Aussie traded at 1.5907 GBP/AUD on Friday down from the 1.6033 AUD on Monday.

There is growing fear in the Australian Economy that the ‘Dutch Disease’ is creeping in and threatening the economy’s labour market. The ‘Dutch Disease’ stems back to the 1959 giant natural gas discovery in Holland. This is where the currency appreciates on the back of a booming commodity industry that is mainly capital-intensive which threatens the survival of labour-intensive industries. Australia’s biggest trading partner, China is one of the biggest driving forces behind this market shift as their need for raw materials (iron ore, coal and natural gas) continues to rise and with it the demand for Australian Dollars. This creates a ‘duel economy’ where mine workers real salaries rise and the rest of the economies real wages stagnate due to a rise in the cost of living.

The uncertainty in the Eurozone prevails as the fate of the Greek-Eurozone relationship will not be decided for some time as they prepare to hold secondary elections in a few weeks’ time according to Minori Uchida, chief analyst at the Bank of Tokyo-Mitsubishi UFJ. With the opinion polls showing signs of a deadlock between political parties, the fate of Greece hangs in the balance.

International news will dominate the Aussie dollar this week as the market will closely follow the Eurozone crisis. Thursday will see China’s release of HSBC purchasing managers index (PMI) for May.

GBP / AUD: 1.6073
EUR / AUD : 1.2986
USD / AUD : 1.0159
NZD/ AUD : 0.7687
Exchange rates as of 08:22, 21 May 2012

Composed by Elizabeth Britz
:: Note: The above exchange rates are based on “interbank” rates.  If you want to transfer money to or from Australia then please register/login on our website, or call us for a live dealing rate. Make use of a Rate Notifier to send you alert when the Australian exchange rate reaches levels you are looking for.

The Aussie weakens after Greek elections