No Signs Of A Slow Down As $AUD Strengthens Further

The Pound hit an 11 year low against the Aussie Dollar in February, going below 2.10 for the first time since 1997. The prospect of yet another interest hike from the RBA this week combined with the further softening of the UK economy has maintained the now familiar downward trend in the exchange rate.

There was considerable AUD strength across the board throughout February, as the Central Bank warned it may need to raise its interest rates further to ensure significant moderation in domestic demand. The RBA minutes revealed that they considered a 0.5% interest rate hike at its February meeting, before settling for a 0.25% increase, thus reinforcing prior expectations for a further rate hike in March.

The UK, on the other hand, cut their rates at the beginning of February in a decision that was backed by all 9 members of the committee, with one member even calling for a half a percent cut. The Bank of England is juggling rising inflation with a slow down in economic growth and slump in the housing market, and as such, faces a tricky predicament.

So is it all doom and gloom?

No! Granted, over the course of the last year the rates have dropped a considerable amount, but this has happened for a reason. The Australian economy is booming – the housing market has been soaring, unemployment is at a 33 year low, and foreign investment is rife. On the contrary, the UKUK and seeking the fantastic opportunities that Australia economy is suffering. The Bank of England has cut their rates to prevent a housing slowdown akin to that in the US, and it seems everything you read in the papers is bad news! This is one of the main reasons that so many of you are leaving the offers for both yourselves and your children.

Would you have decided to move to Aus if the rates had always been 2.10? Most probably, yes. The problem a lot of people now face is coming to terms with these new levels, seeing as when they started the process last year the rates were a lot higher. These were somewhat distorted by the Sub Prime issues in the US, but again you must ask yourselves why it is that you are moving? If it is purely the rates of exchange then the South African Rand at over 15 ZAR to the Pound offers a very attractive return, but does it offer the same lifestyle and job opportunities that Australia does?

For those of you moving over in the next few months, however, you obviously want to maximise the amount of Dollars that you take over to start your new life, and there are different options for you to consider. The key is to get a strategy that will best suit your situation; whether it is fixing a rate now for all of your funds, or adopting a hedging option to spread your risk a little by way of a market order or target rate. Some of you will be considering leaving your funds in the UK as you won’t need them immediately, but there is no guarantee the rates will improve. Another benefit of moving your funds across is that Australia’s interest rates are higher than they are in the UK, thus giving you a higher rate of return and complete peace of mind.

Whichever strategy you adopt, when you have moved your funds over, don’t look at the exchange rates again!! Save yourself the headache and sleepless nights – it can become a stressful habit and take up a lot of your time!!

For a free, no obligation consultation about your situation and the options available please contact The Migration Team