Australia is forecast to be among the three fastest-growing economies in the developed world this year, making it harder for the central bank to convince currency investors it isn’t about to raise interest rates.
The Reserve Bank of Australia must differentiate itself from its counterparts in New Zealand and the U.K., which have signaled their economies may need higher borrowing costs, according to Westpac Banking Corp. Australia’s record-low benchmark rate hasn’t stopped foreign-exchange markets driving its dollar up 1.8 percent in the past month, the best performing Group-of-10 currency ahead of the kiwi and the pound.
While growth in Australia has been bolstered for now by a rebound in commodity-export volumes, the central bank is more focused on boosting labor-intensive industries from housing to manufacturing as mining investment cools. Gross domestic product will expand 3.1 percent in 2014, according to economists surveyed by Bloomberg News from June 12 to June 17, up from a previous forecast for 2.8 percent. New Zealand is predicted to grow 3.2 percent and the U.K. 3 percent.