Sunday, October 31

An economic dawn?

After two years of economic doom and gloom this week’s headlines were filled with unexpected good news. It seems only right that I document this story after two years of blogging about the global recession’s impact. Much to the surprise of nation’s financial commentators, the UK’s economy grew 0.8% in quarter ending September 30. This was double the most optimistic predictions and follows an impressive second quarter of 1.2% growth rate.

This means that, since the start of 2010, the UK’s economy has rebounded at an impressive annualized rate of 3.2%. Economists say this trend is significantly stronger than the recovery in the early 1990s seen after the nation’s last recession. This news also came at a perfect time for the Government. Only six days earlier, on October 20, it had announced details of plans to slash public sector spending by an average of 19%. At least 490,000 public sector jobs are expected to go over the next three years.

Many commentators were up in arms about the size and scale of the proposed cuts. Claims were made that the private sector couldn’t create jobs fast enough to avoid further economic hardship. The scale of the cuts was such that they’d damage the nation’s long-term growth prospects and leave a generation of long-term unemployed in their wake. This week’s news has undermined the more extreme claims. It simply reinforced the credibility of rising employment figures published a week earlier. In the three months to August the number of people in work rose by 178,000.

On a purely selfish note I’m pleased to see positive economic news finally emerging. It means the value of the Sterling will slowly begin to climb above its current low point. Over the course of the recession, the Sterling fell dramatically in value against the Australian dollar. By last month the rate had sunk as low as £1.00 = A$1.60. Exactly two years earlier we’d been getting one additional Australian dollar for every pound exchanged. Believe me when I say that you really do notice the absence of a dollar! Today, you receive A$1,000 less for every £1,000 you convert.

Naturally, as we prepare to return to Australia, the exchange rate is very much on our minds. Garry and I have worked hard to bank respectable savings. With so much at stake we’ll be forced to leave much of this money in the UK until the rate bounces back. Here in Swiss Cottage, the Government isn’t the only party pinning its hopes on a strong recovery.

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