The AUD GBP exchange rate moved higher above the 0.5300 level into Thursday after Westpac consumer confidence for the Aussie economy was better than feared. Australians are hopeful that the economy will rebound quickly from the virus lockdowns in the country’s two largest cities.
The AUD to GBP pair trades at 0.5315 with the release of UK GDP for Q2 ahead today.
Aussie consumer confidence stays resilient
Australian consumers were hopefully optimistic of an economic recovery as data weakened less than expected in early August. The consumer sentiment index dropped 4.4% to 104.1 points in August, the lowest in a year, according to Westpac Bank. But optimists still outweighed the pessimists, with 100 points being the dividing line between the two.
“This is a significant further loss of confidence but better than might have been expected,” Matthew Hassan, senior economist at Westpac said.
“The virus situation locally is clearly troubling, but consumers appear reasonably confident that it will come back under control, and that once it does, the economy will see a return to robust growth,” he added.
The RBA dismissed the gloom and still expects a solid recovery, as they stuck with plans to taper bond purchases recently. The resilience of consumer sentiment will add some support to the central bank, suggesting households and the economy remain well-positioned for a rebound.
The Westpac report is based on a survey of 1,200 people from Aug. 2-7 and showed much less weakness than business confidence released a day earlier.
Sydney has been seeing record daily infections despite being in its seventh week of lockdown. The city accounts for 25% of Australia’s output and 22% of employment. Westpac’s report showed the biggest decline in sentiment was among tradespeople, which was expected after the recent shutdown of construction projects in the cities.
Economists at UBS have said that the latest lockdown in New South Wales will cause a A$1bn hit every week and cost the Australian economy a cumulative A$25bn.
Australian economy could see a major skills shortage
Liberal MP Julian Leeser said that Australia is already seeing “major skill shortages” in the economy.
“As a result of the pandemic half a million temporary visa holders left the country, many of which are skilled migrants,” he told Sky News.
“We have an unemployment rate of 4.9 percent, it’s been more than 10 years since we’ve seen an unemployment rate that low. But there are also record job advertisements right across the economy, according to job figures that were released only a couple of days ago indicated that ads are up 38 percent since the beginning of the pandemic.”
The British economy will see the latest GDP update for the economy in the second quarter today and that should drive the AUD to GBP for the rest of the week. The market expects 4.8%, while the Bank of England predicted 5% so the pound could suffer from its own high hurdle rate.