Where has all our money gone?

Overnight the Reserve Bank of Australia (RBA) raised interest rates by 0.25%. Australia is now the first G20 country to increase interest rates since the global recession took hold. Its base rate also remains above that of many nations. This means Australian banks typically offer a higher interest rate on regular savings.

In the UK most savings accounts current pay zero interest. In desperation banks here have taken to offering one-year introductory rates of up to 3% for new account holders. This practice forces savers to bank hop annually in search of a modest return. Given this dour savings scenario, international investors are pouring money into Australia and thus the value of its dollar is steadily rising.

On the back of today's RBA news the value of the Australian dollar soared against most major currencies. This morning the dollar is worth almost 89 US cents. Meanwhile the British pound plunged in value and is now buying A$1.77. Regular readers of this blog will recall that we were getting A$2.58 for the same pound this time last year (as the chart above shows all to painfully). It's hard to fathom that money we earn in London is now worth one third less than it was a year ago.

Garry and I regularly transfer money to pay our Australian mortgage so the pound's plunging value definitely hurts. However, on a slightly more positive note, later this month Garry and I pass a critical milestone with our mortgage. We officially repay half of our loan with our next regular payment. It's comforting to know we now own more of our Sydney apartment than the bank does. We'll take our economic good news wherever we can find it.

UPDATE - October 8
Today the Australian dollar climbed to its strongest level against the British pound since May 1985. One pound is now buying less than A$1.75. Where has all our money gone?

FURTHER UPDATE - October 13
The forex fell to A$1.71 this morning. I nearly wept.