Medium term GBP vs. AUD

oz0707

Anyone got any opinion as to how the pound will fare against the aussie dollar in the medium term (1-3 years)? Sorry, I know it's a bit of an open ended/how long is a piece of string type question. Just though there would be a few people here who have good knowledge of the deciding factors.
I have googled forecasts and I know a few bits but can't decide/make out what's likely to happen.
Aud = strong, mineral wealth, export driven, high wage inflation?
Pound = urgh! perhaps stable though?

Generali

oz0707 wrote: »

Anyone got any opinion as to how the pound will fare against the aussie dollar in the medium term (1-3 years)? Sorry, I know it's a bit of an open ended/how long is a piece of string type question. Just though there would be a few people here who have good knowledge of the deciding factors.
I have googled forecasts and I know a few bits but can't decide/make out what's likely to happen.
Aud = strong, mineral wealth, export driven, high wage inflation?
Pound = urgh! perhaps stable though?

The economists at my work see some downside to the AUD as a currency. Whether that would translate specifically to falls against the pound is a different matter.

If I had to bet I would say some AUD falls vs GBP are likely but nobody really knows. In general terms I think FX risks are best avoided if possible.

dryhat

For your average punter, gambling on forex is one of the easiest way of losing your money.

Best avoided (especialy if you're talking about life savings witha view to emigrating)

oz0707

Not trying to make a fast buck out of exchange rates don't worry. Ideally i'd like to see stability. I can see AUD slowing as China slows spending. However I can't see us taking off, whereas AUD perhaps has potential to keep growing and strengthening?

HAMISH_MCTAVISH

oz0707 wrote: »

I can't see us taking off, whereas AUD perhaps has potential to keep growing and strengthening?

GBP at historic lows against the AUD.

I'm betting on some strengthening within a 2-3 year timescale.

In fact, I think Australia's economy will weaken significantly within the next 5 years, while the UK recovery will continue to strengthen.

oz0707

What makes you think aus will weaken. Mineral boom peak? Perhaps invested wisely?

HAMISH_MCTAVISH

oz0707 wrote: »

What makes you think aus will weaken.

The real economy in Australia, ie, the 95% of it that doesn't involve digging up dirt and flogging it to China, is already weakening.

Retail, housing, tourism, manufacturing, agriculture, education, etc....

All have suffered immensely under the strong dollar for too long.

Unemployment is far higher than "boom time" conditions would suggest it should be. Hence why the RBA has lowered interest rates dramatically in recent months. And may well have to lower further.

At some point a tipping point will be reached, where the rest of the economy becomes so dire people see past the mining mirage, and the dollar will plummet.

Great news for the rest of the Aus economy when it does of course, but I wouldn't want to be long AUD for the foreseeable future.

The AUD is at the absolute peak of an immense, once in a lifetime, bubble. As are mining assets and commodities. Stay well clear IMO.

the_flying_pig

HAMISH_MCTAVISH wrote: »

...In fact, I think.... the UK recovery will continue to strengthen.

what, even stronger than it is already? is that even possible?

oz0707

It's ok hamish not gambling on it. Am dual citizen and just trying to get an idea of what direction people think it will go...
Wont their housing continue to grow with the immigration? Tourism only get better as you say with a weakening currency. Manufacturing - what manufacturing.
I see they seem to be at a mining peak. What makes you think we're taking off though?

HAMISH_MCTAVISH

oz0707 wrote: »

Wont their housing continue to grow with the immigration?

Yes.

As will ours, once we fix the lending problems.

Tourism only get better as you say with a weakening currency.

Yes.

Manufacturing - what manufacturing.

You'd be surprised.

I see they seem to be at a mining peak.

Indeed.

Mining investment well and truly peaked as well, now talk of overcapacity as commodity prices fall..

What makes you think we're taking off though?

We're not, yet, but the upside for the UK and pound, at the bottom of our cycle, is much stronger than it is for them at the top of theirs.

Generali

My opinion on the Aussie economy FWIW.

The Aussie economy is fundamentally strong; regardless of short term movements we can see that by the fact that trend growth in Australia is about 3% compared with 2.2-2.5% in the UK and broadly similar to the US.

There has been an almighty boom in mining investment which has most definitely come to an end but that boom in investment will be providing jobs and incomes for Australians for a generation. What seems to have started now is a boom in agricultural investment which will, IMHO, make Australia the bread basket of Asia over the next 20 years.

The other thing Australia does well is that it's generally a good place to do business. The laws are sensible and taxes are pretty low. If you're a large corporation looking to set up an APAC office then Australia will be on short list which includes Singapore and Hong Kong and not many (any?) others. That provides a steady flow of jobs for administrators, professional service providers and others (cleaners, cooks, builders etc).

Finally there's Australia's second largest export: education. Australia now educates a large part of Asia's youth. In 2010, well over half a million non-Australian residents or citizens enrolled in Australian Universities and FE Colleges (TAFEs), spending almost $20,000,000,000 in fees alone! As more and more Asians join the middle class we can expect those numbers to rise considerably as you can't buy qualifications in Australia in the way that is possible in much of the rest of Asia and by coming to Aus you also get to learn the international language of business, albeit with a slightly odd twang.

Australia's economy is about a lot more than digging up dirt and sending it to China on boats.

Is the AUD in a bubble? We'll it's very strong against the pound but if you look at a 5 year chart vs HKD, CHF or CAD it's up about 10% which is hardly bubble territory. It's more that the GBP, USD and EUR have been weak for fairly obvious reasons.