Australian Employment And The Dollar

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Includes: CROC, FXA, GDAY
by: Andrew Sachais

Summary

Employment in Australia is slowly improving.

Meanwhile, export revenue continues to decline.

As its economy remains in a mixed state, the lending rate should stay low, weighing on potential gains in the Australian dollar.

Employment in Australia is improving, but still operates below capacity, weighing on the prospects of its currency. The Australian dollar is represented by the CurrencyShares Australian Dollar Trust ETF (NYSE:FXA).

In the most recent month, the employment figure came in at an annual pace of 1.18%, above the previous month's reading of 1.11%. Since peaking at lose to 2.5% in 2011, however, employment has steadily fallen, seen below. As its economy has weakened in recent years, employment levels have declined.

Data provided by the OECD

Moreover, export data continue to weaken. In April, the export figure came in at an annual pace of -10.34% contraction, down from the previous month's reading of -10.09%. After peaking at over 42% in 2011, export have fallen to current levels, seen below. As China, a major trading partner, saw its economy slow, export of resources out of Australia similarly fell.

Data provided by the OECD

Meanwhile, recent gains in employment, off of its decade low levels, have benefited consumer spending. In the first quarter, the retail sales figure came in at an annual pace of 3.20%, below the previous month's quarter's reading of 3.32%. Since bottoming at close to 1% growth in recent years, retail sales have steadily risen, seen below. A shift in momentum looks to have taken place in consumer spending as increasing employment and low lending rates aid the measure.

Australia's economy is improving, but remains suppressed as well. Employment is rising, albeit slowly off of decade lows. Moreover, weakness in China continues to weigh on export revenue and overall economic activity on the island continent. One of the bright spots remains consumer spending, aided by low lending rates. Until Australia's economy can grow on all cylinders, however, its lending rate should remain low, weighing on its currency's strength.

Data provided by the OECD

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