Australia Finance, Finance Australia

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Information on Australia finance provides an insight into the critical markets and the economy of the country. Australia’s efforts to open the doors of its financial services sector, reduce high tariffs, improve the flexibility of thelabor markets, reform the tax system and privatize government organizations have played a key role in fueling the country’s economic growth.

Australia’s economy was in recession in the late 1980s and early 1990s, during which government debt soared to $96 billion under the then Prime Minister Paul Keating. The succeeding government introduced several measures due to which the country wasable to pay off the entire debt by 2007. Australia’s economy grew at an annual rate of about 3.3% from 1992 to 2008 due to favorable government policies and growing demand for commodities. The Financial Crisis of 2008 did not spare Australia and byNovember three-quarters of the government’s budget surplus had evaporated. Australia’s unemployment rate hit 5.2% in March 2009, following the highest monthly plunge in full-time jobs since 1991.

 

Australia Finance: Currency

Since February 14, 1966, the official currency of the Commonwealth of Australia has been the Australian dollar (AUD or A$). The Commonwealth of Australia includes the Cocos (Keeling) Islands, Christmas Island and Norfolk Island, the independentTuvalu and the Pacific Island states of Kiribati and Nauru. The AUD is issued by the country’s central bank, the Reserve Bank of Australia (RBA).

As of end-2007, the Australian dollar was the world’s sixth most-traded currency, closely behind the US dollar, Euro, yen,pound and Swiss franc. The AUD accounts for roughly 5% of the total daily forex transactions (which is approximately US$3 trillion). The absence of government intervention in the forex market, a strong economy, high interest rates and the country’s strategic location in the Asia-Pacific region have made the Australian dollar highly popular among currency traders.

The Australian dollar was initially pegged to the British pound. In 1946, the country started pegging its currency against the US dollar. From 1971 to 1974, Australia adopted the moving peg system. Concerns associated with the US dollar forced thecountry to move the AUD against a basket of currencies using the trade weighted index (TWI). The Australian financial system was finally deregulated in end-1983 and the float regime was adopted for the country’s currency.

Australia Finance: Stock Market

The Australian stock market comprises of two major stock exchanges, the National Stock Exchange of Australia Limited and the Australian Securities Exchange (ASX). The largest stock exchange in Australia is the ASX. This bourse was formed in December 2006 by the merger of the Australian Stock Exchange and the Sydney Futures Exchange. As of June 30, 2007, 2,090 companies, with a market capitalization of $1.63 trillion, were listed on the ASX. On an average, the exchange handles $5,422 million worth of trade daily.

The major market index in Australia is the S&P/ASX 200. This index consists of the top 200 companies listed on the ASX. The country’s stock markets are regulated by the Australian Securities and Investments Commission (ASIC). With more than 50% of Australia’s adult population owning shares of public-listed companies, the country has one of the highest percentages ofshareholders in the world.

Australia Finance: Commodity Market

Commodities are the strength of Australia. Between 1997 and 2008, the country’s commodity exports grew fivefold. There are several commodity exchanges in the country, of which the Sydney Futures Exchange is the largest. This exchangespecializes in wool and cattle futures. The Sydney Futures Exchange is popular for interest rate products, equities, coal futures and commodities.

 

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