The AUD has not had the best year in 2019, with lowered interest rates, an above target unemployment rate and lowered spending all combining for a slow year. Economists have warned that 2020 does not look like it will shape up to be much better than 2019. More interest rate cuts are expected, and the outlook is being pinned as better than 2019, but still below potential. They have further stated that the biggest potential surprise could be if the economy picks up at a faster pace than is anticipated, this is something that investors will be hoping for too.
A Slow Year Predicted for the Australian Dollar in 2020
In a recent survey, economists were questioned regarding the future outlook for the AUD. The answers were not optimistic with some suggesting that Australia’s economy is likely to struggle to gain momentum and others noting that 2020 should be a more positive year than 2019 but “nothing to shoot the lights out”. One economist from Deloitte Access Economics suggested that the Aussie economy is heading into the new year with a “bad case of the flu and in need of some TLC”. This TLC will most likely arrive in the form of the RBA and the fiscal policies. Markets are tipping a rate cut by mid-2020 to drive the economy. But there are also optimists, with Nerida Conisbee of the REA Group suggesting that the economy is slowly recovering but it should be in much better shape in 2020 compared to the current year.
Economic Growth Is Expected to Build Upon This Year but Will Not Reach Its Potential
The growth for Australia’s economic growth has ranged from 2% to 2.75% in recent forecasts. A chief economist at IFM Investors stated that he expects the figure to be around the 2.25-2.5% range, especially if there is little to no further material stimulus from the Government. Whilst the RBA remains optimistic suggesting that the growth should be around 2.75% rising to around 3% in 2021. However, in the last RBA meeting, the minute revealed that the bank had opened the door to reassessing this optimistic claim as they will reassess in February 2020 and prepare updated forecasts.
The outlook for the new year does not spark optimism, but a positive stance from the Central Bank is reassuring. Many are claiming that the new year should build upon 2019 but the potential room for gains may be limited as the economy is still ‘under repair’.
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