Australian Dollar Gains as Chinese Exports Climb

With exports to China peaking up, Australian dollar gains again. The country is still in an excellent position, compared to many other countries, says Peter Lavelle.



What slowdown?

This is the message the markets received this week, as exports of Australian commodities to China reached a fresh peak, in spite of a perceived winding down of the Asian tiger. All in all, trade to China jumped some 14.0% last month, signalling that Australia will remain resilient in spite of global headwinds.

Furthermore, these reports of Australian resilience had a boosting effect on the AUD, which climbed some three cents against the UK pound to hit 0.66. This is its highest rate against the embattled UK currency since late March.

Looking ahead, so long as Australia continues to defy the global slowdown, we can expect the AU dollar to keep ratcheting gains too.

Elsewhere, excellent trade data isn't the only reason the AUD looks in good shape this week.

australian dollar Australian dollar gains

Retail sales in Australia also defied forecasts, to climb 0.5% last month.

This comes following months of disappointing figures from consumers, in which people took news of the Eurozone debt crisis to heart and stayed away from shops.

Yet following the Reserve Bank of Australia's decision to cut interest rates to 3.5%, it seems people have felt encouraged to hip out their credit cards once again. In this too, Australia is defying a global trend of consumer caution.

Alas, there are some dark clouds on Australia's horizon.

These mostly concern the newly introduced carbon tax. Intended to tax the carbon emissions produced by big businesses, Australian premier Julia Gillard argues it is essential both to the environment, and as a way of spreading the benefits of the mining boom to the rest of the country (miners, after all, are big polluters.)

Yet Ms. Gillard has not had the most success selling this policy to Australia's public. Instead, opposition leader Tony Abbott has convinced people it will limit innovation, while driving up prices. He has promised to repeal the tax should he in the next election. Unfortunately, this has created some uncertainty among businesses, who aren't sure if they're being charged a tax that won't exist in 12 months.

But arguably, this is a good problem to have. It after all has to do with how to make the most of your prosperity, rather than how to generate it in the first place.

This means Australia is still in an enviable position compared to much of the world, and (economically at least) has a bright future.

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