Aussie Dollar Tumbles as Mining Boom at Its End?

The mining boom coming to an end rumour hits the Aussie dollar. See below what contributed to this and what's forecast to happen next.

Peter Lavelle - 30.08.2012

Recent Changes in The Exchange Rate:

  • UK Pound to Australian $: From 1.4753 on August 6th to 1.5319 (+3.837%.)
  • US Dollar to Australian $: From 0.9452 on August 6th to 0.9674 today. (+2.349%.)
  • Euro to Australian $: From 1.1624 on August 9th to 1.2144 today. (+4.474%.)

What's Affected the Australian Dollar

Is the Australian mining boom at an end? That's the rumour circulating on practically every economics website worth its salt this week, and it's responsible for a sharp fall in the Australian $.

As you can see above, the UK pound has gained almost six cents against the Aussie dollar in the last two months, while the euro and US $ have also enjoyed solid gains. For people planning to emigrate to Australia, this gives them an opportunity to purchase a much higher Australian dollar total when they exchange currencies then.

So what's responsible for this sudden run of bad luck in the so-called Lucky Country? It has an awful lot to do with China. In the last six months, the world's second largest economy has endured a sharp slowdown in growth. In turn, that means its demand for Australian commodities (which has fuelled the mining boom Down Under) has declined.

In real terms, what this means is that prices for iron ore have reached their lowest point since 2009 this week, at just US $90.30 a tonne. That's almost US $30.00 below the point which mining experts believe iron ore prices have to be for Chinese investment to remain profitable.

Hence, a falling Aussie dollar, and a strong likelihood it will continue to decline in the short-to-medium term.

What's Going to Happen Next

There's every chance the Australian dollar will continue to decline. This is because the outlook for Australia's economy is changing fast.

For instance, this week Commonwealth Bank strategist Alex Stanley wrote: "The market is beginning to revise down its expectation of the biggest single driver of Aussie growth." That will make investing in Australia a lot less attractive, which in turn will limit demand for the Aussie dollar, making it cheaper.

Adding fuel to the fire, last Thursday Australia's resources minister Martin Ferguson said that: "The commodity price boom is over and anyone with half a brain knows that." It really could not be much clearer.

What this all adds up to is that, as Larry Elliott in The Guardian notes: "Whatever happens, the Australian dollar is a sell."

How This Affects You

For people planning to relocate Down Under, all this is to the good. It after all means that, when they exchange their pounds, euros or US dollars into Australian dollars, they get a higher total. That means buying Australian property is cheaper, and should leave them with a bigger balance in their Australian account when all is said and done.

Find Out More

To find out how this information might affect your Australian dollar transfer, just enter your details into the form below. I'd be delighted to provide an in-depth response to your query, free of charge.

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