Although Australia appears to have dodged a bullet when it comes to the worst financial meltdown since the Great Depression — the economic situation across Australia is far from even. Looking at state-based economic figures shows great divergences between Australia’s states. Although we have been repeatedly told that the commodities boom is over, the continuing strong demand from China and the nascent global recovery are suggesting otherwise.
Over the past few days, the little Aussie battler — not that long ago frequently disparaged as the Pacific Peso — has soared as high as 88 US cents. Recent momentum suggests it is likely to continue rising through the end of this year.
A significant thing Australia faces as a consequence of the higher dollar is declining competitiveness in several industries. Call centres are a good example. The Australian dollar has soared in recent months against the Malaysian ringgit — now at 3.02 ringgit per AUD, up from 2.30 late last year, and the Indian rupee – now at 42 rupee per AUD, up from below 32 rupee per AUD earlier this year — and higher than the heights of 2008.
Only this week we saw Vodafone Hutchison Australia (VHA) announce that 450 call centre workers in Melbourne will be losing their jobs. It is true some of these jobs are migrating across state borders to Tasmania, but many of these jobs will be replaced by workers in Mumbai, India — a direct result of the soaring currency.
Why is the Aussie dollar on a tear? As what is known by many traders as a “commodity currency” — when prices for things such as iron ore, coal, copper, gold and other base metals rise — they drag the currencies of countries that produce and export them higher. As is well known, we export a lot of rocks. That, combined with our, relatively speaking, higher interest rates — at 3.0% among the highest in the developed world — again are drawing in investment flows and propelling our economy and the dollar higher.
State-based figures on confidence and unemployment back up this picture. Overnight Roy Morgan Research released a report for August outlining the divergence in consumer confidence around Australia. An Australia-wide average of 121.4 misses the full picture. Western Australia, the state relying most heavily on exporting commodities has the highest consumer confidence in Australia — 125.4, a full 4 points above Australia as a whole. The latest Roy Morgan unemployment and underemployment figures for August show West Australian unemployment (6.0%) and underemployment (5.0%) at a combined low 11.0% — also well below the Australian unemployment (7.4%) and underemployment (7.0%) rate of 14.4%.
Australia’s largest states don’t fare as well. NSW has higher-than-average unemployment at 7.9%, and a consumer confidence figure of 122.6 — surprisingly good considering the incompetence of the NSW government, which seems to spend more time in-fighting than actually governing. Victoria has high unemployment at 7.5% and consumer confidence of 120.6 — as Australia’s manufacturing hub, Victoria has been hit hard by the global slowdown — these figures certainly back up that argument.
Looking at Queensland provides an interesting picture. The Roy Morgan unemployment estimate is well above the Australian average at 9.1% and consumer confidence in Queensland is at only 119.7 for August. At present it would appear the continuing strong commodities exports from the Queensland outback seem not to be able to offset the weak international inbound tourism industry over the past year, which explains this higher than expected unemployment.
All-in-all, the latest figures we have on our economy suggest what had been known as the “two-speed” economy in Australia in recent years is still powering along.