Australian Growth, Rates and Currency Stay Firm

Data shows that the Australian economy remains robust with labor shortages pointing to higher interest rates down the road. This should also firm up the Aussie dollar helping returns of the Australian exchange-traded fund (EWA).
Australia’s already low unemployment fell further, to 4.3 per cent in December, down from 4.5 per cent the previous month, and only slightly ahead of September’s 33-year-low of 4.2 per cent according to the an article by Virginia Marsh of the Financial Times.

The stronger-than-expected data came just two days after Kevin Rudd, Australia’s new prime minister, made a high profile visit to the Reserve Bank. Since he hammered Mr. Howard during the campaign on the interest rate issue, higher rates so soon after coming to power must be a tad uncomfortable.

“We are engaged in a national war against inflation,” Mr Rudd said on Thursday after announcing funding for 20,000 training places in mining, construction, health, community services and other sectors facing the most acute skill shortages. Economists are expecting next week’s data to show core inflation of 3.3 per cent for last year, ahead of the 2-3 per cent band target. Many economists believe there was little prospect of an imminent cut in New Zealand’s rates, the highest in the industrialised world at 8.25 per cent.

The Australian ETF, while down so far in 2008, closed up 1.5% in trading on Friday.