The Australian Dollar Explained

The Australian Dollar Explained

12 November 2009

The strength of the Aussie dollar and what this means for you

If you haven’t noticed, the Australian Dollar has been growing steadily over the last six months. In October it reached a high of buying US$0.91. It has been predicted that throughout 2010 the Australian dollar will continue to grow and exceed the American dollar, even if only for a short time.

Shane Oliver, chief economist at AMP Capital Investors, and the NabCapital head of foreign exchange, have both predicted the Australian dollar will peak in 2010. If this parity is achieved it will be the first time in 30 years the dollar has reached such a value.

This is great news for the Australian economy, but what does that mean for you?

Consumers will be affected by the currency exchange in different ways. Firstly, it is important to understand how the currency exchange is affected by the world economy. Exchange rates are determined by the supply and demand of a given currency, among other factors.

Higher interest rates in a country increase the demand of a currency, therefore increasing it’s value. So when the Reserve Bank of Australia raised interest rates to 3.5% in November 2009, they were increasing the value of the Australian dollar, particularly as the RBA lead the international market on interest rate rises.

So Australia is sitting in a good position with a high demand for our currency. This means there has never been a better time to travel for Australians. Not only is the exchange rate in our favour, but airfares are at record lows. Travel companies have reported a surge in airfare bookings particularly to America, Europe and Britain.

But wait… before you pack your bags and book your flights check out our travel services. We have a range of products to make your trip easier and carefree. Remember, we are always trying to offer products and services to meet our members’ needs.