Australian dollar hits 29-year high

The Australian dollar has hit a near 30-year high. That makes Oz more expensive for UK tourists. A year ago £1 bought you $1.65 Oz dollars. Today one British quid buys you around $1.55. But that's nothing if you were to roll back to the start of 2008. Then £1 bought you $2.26. Clearly the Oz economy is rocking. Why?

Rocking up

Think commodities and interest rates. Huge demand from the usual suspects - China, India - has seen massive demand for Australian raw materials. Last year Australia's economy surged almost 3% and it's likely it could outpace that figure this year. A phenomenal growth story compared to the UK's emaciated economy.

Higher-than-average interest rates has attracted a lot of international money, especially given the low rates in the West. Investing in Oz companies is also a nifty way of investing in China's economic renaissance, but with much less risk.

It's a fairly phenomenal result when you figure in large-scale national disaster. Flooding on a biblical scale at the start of the year saw the Australian states of Queensland and Victoria hammered as insurance claims mounted and shipments for cotton, coal and fruit took a battering.

Bigger than the UK?

Australia's economy - so much reliant on raw materials - was once thought of as old-school. It's still an old-school economy, of sorts. But how things have come around.

There's even the possibility of Australia's economy overtaking the UK's within 20 years, given the economy's building strength and exposure to fast-developing Asia. But though its currency is riding high, it means exports and tourism is weakened.

So if you're thinking of visiting Oz, you may have to root around the sofa to round up missing £1 coins. They're not buying so much unfortunately.

Links (opens in new window)
Read Full Story