The Australian economy in 2024 has resembled a rollercoaster ride: filled with ups and downs that reflect broader global uncertainties and domestic challenges. The Reserve Bank of Australia’s (RBA) decision to maintain the cash rate at 4.35% was largely a reaction to persistent inflation, which has settled around 3.5%. This inflationary pressure has posed significant challenges, as Australia’s gross domestic product (GDP) recorded a subdued growth of only 0.8% over the year.
Despite these headwinds, the labor market has shown surprising resilience, with unemployment sitting at a relatively low 4.1% as of October. However, the Australian dollar (AUD) has faced downward pressure, fluctuating in value as it grapples with a precarious global environment and adjustments in monetary policy. Looking toward 2025, there is a glimmer of hope as analysts project a more cautiously optimistic economic outlook. The RBA is expected to ease interest rates gradually as inflation begins to normalize into the target range of 2-3% by mid-to-late 2025. While GPD growth is forecasted to improve, it is anticipated to remain below historical trends, supported primarily by government spending initiatives and a tentative recovery in household consumption.
Furthermore, the trajectory for the AUD/USD exchange rate has been bearish, with recent trading showing a significant decline. The dollar has retreated by approximately 5% during 2024 alone, with technical analyses indicating a possible further dip. The currency sank to a noteworthy 13-month low and remains under critical descending pressure stemming from a long-term ascending trend. Analysts are observing immediate support levels at 0.6270 and 0.6170, while potential resistance points appear around the 0.6440 area.
New Zealand: Navigating Economic Headwinds
New Zealand’s economy, too, has encountered considerable turbulence throughout 2024. The Reserve Bank of New Zealand (RBNZ) adopted a more accommodative stance, reducing the official cash rate to 4.25% in an effort to stimulate growth amid rising unemployment and sluggish economic activity. While inflation has eased to 2.2% and remains within the RBNZ’s target, high service sector prices continue to challenge broader economic performance.
The forecast for 2025 signals a cautious recovery, with the RBNZ aiming to sustain inflation within the 1-3% range, potentially lowering the rate even further to around 3.3%. GDP growth is anticipated at 2.1%, with unemployment hovering near 5.2%. Despite the resilience in wage growth, projected at about 2.8%, the New Zealand dollar (NZD) has experienced marked volatility within a defined trading range since early 2023. Currently, the NZD/USD pair struggles near the record lows. The consolidation in the currency’s movement has created a tense environment, raising concerns about additional tests of critical support levels near 0.5700 and 0.5600.
Canada: Signs of Economic Recovery Amidst Challenges
Canada’s economy has not been immune to 2024’s challenges, despite a slightly more positive outlook. The Bank of Canada (BoC) took proactive steps by reducing its policy rate to 3.75% by October, addressing the dual dilemmas of stagnant economic growth and rising unemployment. With inflation tapering to about 2%, the BoC’s measures aim to foster economic activity despite uneven inflationary effects experienced across different sectors.
A gradual economic recovery seems on the horizon for 2025, bolstered by expectations of improved consumer spending and business investment. However, unemployment may still trend slightly above historical averages, reflecting underlying weaknesses. The Canadian dollar (CAD) has demonstrated bullish tendencies recently, highlighted by a notable surge that brought the USDCAD pair to new multi-year highs. These levels should be monitored closely, as traders navigate potential psychological resistance zones above 1.4300.
Overall, technical analysis indicates an intriguing interplay between bullish momentum and market corrections, with immediate support likely at 1.3945. Analysts advise careful observation of market trends, as oscillators show mixed signals: while there’s evidence of an overstretched market cumulatively from the relative strength index (RSI), the moving average convergence divergence (MACD) extends continuous bullish momentum.
As 2024 wraps up, economies across Australia, New Zealand, and Canada are navigating through a myriad of challenges shaped by domestic policies and global economic currents. While glimpses of recovery are present, uncertainties loom, guiding expectations for cautious optimism moving forward into 2025. Stakeholders in these economies must remain vigilant to the ever-evolving landscape that could influence their financial futures. The balance between stimulus and sustainable growth is delicate, underscoring the complexities of contemporary economic governance in a fluctuating global market.