Australian GDP figures were released yesterday and they did not make for good reading. Quarter on Quarter data fell to 0.2% and Year on Year figures fell to 2.3%.

The Australian economy is suffering due to its heavy reliance on China purchasing its goods and services. If Chinese growth slows this has an impact on the Australian economy and in turn the Australian dollar.

Currency Pair% Change in 1 monthDifference on £200,000
Reserve Bank of Australia Outlook Confidence

The US-China trade war has resulted in a slowdown in Chinese growth which has had an impact on the Australian economy. Investors are choosing to shy away from the Australian dollar in search of safe haven currencies.

The fall in GDP and Retail Sales caused the interbank GBP/AUD rate to hit a four month high of 1.8775. There have been hints from economists that the recent run of poor data could force the Reserve Bank of Australia’s (RBA) hand and to interest rates.

Some economists are not only putting the falling growth down to the reliance on China, but also the housing sector. Housing construction fell by 3.4% Quarter on Quarter.

Australia’s slowing economy combined with the ongoing down turn in house prices now appears to be having an impact on consumers’ willingness to spend.

RBA Governor Philip Lowe spoke last week and said that household spending has risen faster than income in the past five years, in part due to the 50% increase in the price of the average home during these five years.

He warned that with the significant drop in house prices of 9% in the last year they could still have further to drop and this could cause house hold spending to decline and savings beginning to rise.

Retail Sales

Australian Retail Sales data landed overnight and despite a rise from last month’s -0.4%, they still landed below expectations. The expectation was an increase to 0.3%, unfortunately they landed at 0.1%. Thus giving further justification for a drop in interest rates.

There is little data of consequence released for the remainder of the week.


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