When compared to more advanced economies, the economic performance has been remarkably good in recent years, despite the backdrop of a somewhat volatile global economy. This is mainly due to the high growth rates of its main trading partners in Asia, especially China, which has dominated its mineral exports. However, GDP growth started to slow down during 2013, through the combined effect of lower Chinese growth rates, causing commodity prices to fall. In addition, the various national business surveys in June and July of this year indicated a weakening of profit expectations and business confidence. After a 3,6% increase in 2012, economic growth is expected to slow to 2,4%. In early August, the Central Bank lowered the reference rate to an all-time low of 2,5% from 2,75% in an attempt to stimulate a new wave of economic growth, particularly in the non-extractive sectors. The interest rate cut was the second in 2013, and fits into a context of easing that began in November 2011, when the base rate was lowered from the previous 4,75%. The positive signs however come from exports, with the volume of raw materials expected to grow in the two-year period 2013-2014.
According to atradius, the 2,7% growth forecast for 2014 appears more uncertain if one looks at the reduction of investments in the mining sector after the peak reached last year, given the lack of major projects in the face of volatility in commodity prices, thus questioning whether the non-mining sector can really assume the role of engine of growth. Private consumption was quite good during 2012 (+3,2%) and this year the drop in retail prices has led to an increase in sales. However, retail spending has declined since then, and is expected to grow by just 0,9% in 2013.
Unemployment stood at relatively low levels (5,2%) in 2012, but the trend has been upwards since the beginning of 2013, with fewer jobs in the mining sector, with forecasts speaking of an increase to 5,6% for the current year. At the same time last year inflation was also relatively low (1,8%). Moderate increases are however expected for 2013 (2,2%) and 2014 (2,7%).
In this scenario, the depreciation of the Australian dollar should help rebalance the situation, having reduced its differential against the US dollar in recent years, as indicated by the increase in the price of export minerals such as iron ore and coal between 2009 and the third quarter of 2011. However, despite the decline in ore prices since the end of 2011, the Australian dollar remained at relatively high values also thanks to the increase in portfolio investments, considered Australia a safe haven given the strength of its economy and the gap between domestic and foreign interest rates. In this way, however, we have arrived at hit the domestic tourism industry and export demand for industrial goods, without forgetting the services. Furthermore, domestic production found it difficult to compete with imports: in particular, in the steel and automotive sector.
The Australian dollar thus began to depreciate against the US dollar in May of this year, down by around 10%, for several reasons: the general upward pressure on the US dollar, lower growth expectations from China, the fall in mineral prices and a decline in confidence in the outlook for the Australian economy. The depreciation of the national currency is generally seen as a factor that should provide relative relief to tradethus helping to promote a rebalancing of the growth of the national economy. A moderate depreciation of the Australian currency is expected to continue through the remainder of 2013, with a further 10% devaluation by the end of 2014. The amortization forecast partly reflects the recovery of the US economy and the US dollar, adding to this the slowdown of the Chinese economy and the trend of export prices of minerals.
