The AUD GBP exchange rate was higher on Wednesday by 0.40% as traders cheered a better-than-expected second-quarter jobs number. The reading came in at 9.6% annually, versus 9.2% expected but investors are aware that this number preceded the latest lockdown chaos.
The AUD to GBP trades at 0.5335 and without further data from the Aussie or British economy, the pair could be supported by the GDP number into the weekend.
Australian GDP higher but damage will come later
Australia’s economy grew in the quarter to June, but economists are aware that the growth will not last into Q3.
According to the Australian Bureau of Statistics (ABS) on Wednesday gross domestic product (GDP) increased by 0.7 per cent in the three months to June, beating economist predictions, with some fearing a recession.
The GDP grew by 9.6% 12 months to June as the economy was rebounding well before the latest lockdown measures.
However, the economy is expected to contract significantly in the September quarter because of the restrictions enforced across the states of New South Wales (NSW) and Victoria, which account for about half of Australia’s population.
Treasurer Josh Frydenberg said the figures proved that “the Australian economy is strong” but conceded they would be of “little comfort” to millions who were enduring lockdowns.
“The full impact of the lockdowns in NSW and Victoria will be seen in the September quarter,” Frydenburg said. “It is expected to be negative and see the economy contract by at least two percent.”
However, shadow treasurer, Jim Chalmers, said the numbers showed “the economy was slowing before the Sydney lockdown”.
“Australia’s growth is now slower than the United States, United Kingdom, and OECD average, and the worst of the economic pain caused by the Morrison government’s incompetence is yet to come,” he said.
The AUD to GBP has no big-ticket data for the rest of this week and the Aussie should be supported by the latest figures which could soften the potential for the worst growth estimates.
Virus woes still show a long way back for economies
The Australian figures show the long uphill battle for the country and trades are surely concerned that the UK could suffer a similar fate as the table turn again. Australia will shift towards its summer weather, while the autumn and winter descend on the UK.
ABC News in Australia called the latest GDP outlook: “A listlessness that pre-dates the arrival of a global pandemic.”
Bloomberg’s James McIntyre said: “Australia’s recovery from the lockdown in 3Q is likely to be more subdued, reflecting reduced fiscal supports and a gradual easing of restrictions while the economy adapts to living with the virus.”
The Q2 number showed that households and government spending played a big part.
Household spending rose by 1.1%, adding 0.6 percentage points to the GDP figure, driven by services consumption as the restrictions were being eased around Australia ahead of the latest problems. Government expenditure advanced 1.3%, adding 0.3 percentage points to the figure.