The Australian people will vote in Government elections on the 18th May and there is rumoured to be a change on the cards from the current Liberal Party to the Labour Party. From an economic perspective the last few years have been poor for Australia.
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Stagnation of wages, low inflation and an estimated half a trillion Aussie dollars wiped of householder wealth as prices tumble. Some may argue it’s hardly surprising that the current Government may do well to find themselves back in power in a few weeks time.
The election, if run today in the polls is considered incredibly close with only one or two seats forming the majority. There is currently a coalition lead by the Liberals that is made up for three parties slightly behind the Labour Party who are leading in the polls.
The main focus for both campaigns is the economy moving forward and how they’re going to stop the current demise. The Reserve Bank of Australia may not be far from chucking their own spanner in the works as talk of interest rate cuts are continuing.
At the start of next week the Reserve Bank of Australia (RBA) will deliver their latest interest rate decision and many expect that they may look at cutting rates. However there is some consideration being given to quantitative easing which is what the Eurozone have been doing for the last few years to prop up the economy.
Either way the RBA will need to act sooner rather than later as pressure mounts. A cut in rates would see the interest rate level fall to record lows which they’re currently already at and arguably all it may do is lead the housing market to become more attractive and not actually encourage borrowing and spending for consumers.
The GBP/AUD interbank rate has remained in the 1.80s for the last two months steadily rising to nearer the 1.85 level. If the RBA were to cut rates in the early hours of Tuesday morning then there could well be a significant movement. If you’re looking to complete a transfer then make sure your trader is aware.
The Australian dollar was on the back foot this week, as Australia’s economic growth disappointed in Q3, from July to September. As a result, the Reserve Bank of Australia looks increasingly set to cut interest rates further in 2020.
By Daniel Wright
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