The recent increases in the Australian key policy rate from October 2009 to May 2010 have dampened consumer sentiment and growth in retail turnover in Australia in 1H10. Nevertheless, the Australian economy continues to grow, thanks to a boost from exports of mineral resources to China and India that have in turn helped increase employment in Australia.
As a result, the unemployment rate in Australia has continued to decelerate from March to June 2010, particularly unemployment rate in June that dropped to an 18-month low at 5.0 percent. Satisfactory Australian employment figures will help support consumption there in the coming months. It is expected that the Australian GDP may grow 3 percent this year, according to the IMF, versus their 1.3-percent growth in 2009.
Thai exports to Australia have shown satisfactory growth despite interest rate hikes by Australian policymakers. Our exports to Australia in 1H10 were valued at USD5.04 billion, growing 41.53 percent YoY. From October 2009 to June 2010 (8 months) when the latest round of interest rate hikes were seen, Thai exports to Australia were valued at USD7.5 billion, increasing 40.84 percent YoY. Thai exports in 2H10 will likely be boosted by rising in Australia's domestic demand which is expected to be supported by the mineral resource industry there that will likely grow continuously due largely to increasing demand for iron and coal in India and China. Nonetheless, demand from those countries may decelerate in 2H10 due to measures to forestall overheating and bubbles in China, as well as the interest rate increases by Indian authorities to limit inflation there. In addition, mining industry in Australia is expected to benefit from profits-based taxation reforms. It is expected that ore mining in Australia will be a key driver for the Australian economy. Therefore, Thai exports should receive a windfall in 2H10 from improved consumption in Australia.
However, inflation in Australia during 1H10 that was around 2.9 percent, approaching their target of 2.0-3.0 percent, should be monitored because it may lead to a new round of interest rate increases in August or later months. This may also increase investment and consumption costs which possibly affect Thai exports to Australia. It should be noted that, the boost from the Australian export sector may weaken in line with the economies of their key trade partners, thus affecting Australian demand for Thai products.
Key Thai exports to Australia during 6M10 included automobiles, accessories and parts, gems and jewelry, iron and steel (including structural steel), air-conditioners and parts, plastic pellets, canned and processed seafood, computers, accessories and parts, refined oil and rubber products.
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