Australia’s upswing remains on track

Today’s GDP data show that Australia’s recovery was sustained in Q3 on the back of solid domestic demand. Long-run prospects remain bright thanks to the mining boom, high population growth, and Australia’s rapidly expanding economic links with the rest of Asia. The Reserve Bank (RBA) will likely pause the tightening cycle in Q1 but policy rates should still move higher in 2010. Any further nearterm slippage in the Aussie dollar is likely to be reversed next year.