At the start of 2022, the UK economy was expected to grow at a much faster pace than Australia, and the value of the Great British pound (GBP) against the Australian dollar (AUD) was tipped to strengthen.
However, last year turned out to be a particularly turbulent one for the United Kingdom, with record-high inflation worsening the cost-of-living crisis, Brexit continuing to serve as a de-stablising political force and Russia’s invasion of Ukraine driving up energy prices.
And who can forget Kwasi Kwarteng’s September ‘mini-budget’ of hefty tax cuts and spending promises causing not only the pound to fall to its lowest-ever level against the greenback—almost reaching parity—but the resignation of PM Liz Truss.
Currency exchanges are often volatile and can change in unexpected ways due to geopolitical events.
Nonetheless, if you need to exchange Australian dollars (AUD) for GBP, understanding the GBP to AUD forecast will help you decide when is most favourable to do so.
The GBP to AUD rate sets out how many Australian Dollars can be bought for 1 British Pound. As of January 2023, £1.00 (GBP) was equal to $1.76 AUD. By November, it was buying $1.92 AUD, reflecting the poor performance of the Aussie dollar in the second half of this year and the recovery of the Pound.
Naturally, buyers of AUD want a high rate and buyers of GBP want a low rate.
Related: AUD to USD Forecast: Dollar Could Fall Further Amid US Recession Fears
Great British Pound: Current Outlook in 2023
Since the decision to leave the European Union was announced after the Brexit referendum of 2016, the value of the pound has been in decline. The UK was also particularly bad hit by the Covid-19 pandemic, in comparison with Australia.
After an extraordinarily difficult year in 2022, there was cautious optimism that the GBP would strengthen this year—albeit only modestly.
“While 2023 is not expected to be as turbulent a year for the pound as 2022, which saw three UK prime ministers, four chancellors, and a record low against the USD, risks are still tilted to the downside,” noted Fiona Griffiths, currency expert at The Currency Shop, which is powered by financial technology company, Wise.
“The Bank of England has warned that it is likely to underwhelm with rate hikes as the UK enters a recession that could last until 2024.”
Nevertheless, the GBP has proven to be stronger this year than expected. The historical average over the past decade for GBP to AUD exchange rate has been $1.75—much lower than the current rate of $1.92 and good news for those buying Aussie dollars.
What Drives the Australian dollar?
The AUD is what is known as a commodity currency, in that it aligns itself with the world prices of primary commodity products. Australia relies on the export of certain materials such as coal and iron ore for a substantial part of its income.
“Given that China is the world’s largest consumer of commodities, and Australia’s largest trading partner, the health of the Chinese economy can be a key influence on AUD,” Griffiths says.
“The Australian dollar was weighed down in 2022 by global recession fears and the zero-Covid policy in China, its largest trading partner.”
More recently, China’s economy has come off the boil, and if demand for Australia’s exports soften as a result, the Aussie dollar would feel the impact.
Nevertheless, recent high-level visits between Australia and Chinese leaders—including a recent visit to Beijing by Anthony Albanese—appeared to signify that trade embargoes against Australian products such as wine will be reconsidered.
Related: USD to AUD: USD to Remain Strong in Face of Global Shocks
GBP to AUD: Long-Term Forecast
Griffiths believes that restored political credibility and a resilient jobs market could help the Pounds, and the forecast for next year is noticeably brighter.
By 2024, inflation in the UK is expected to return to target levels set by the Bank of England. Along with a recovery in economic growth and a potential resolution to the Brexit Northern Ireland protocol, the pound could see a “strong recovery,” predicts Griffiths.
Australia’s Big Four Banks are all predicting the Aussie dollar will strengthen marginally against the Pound in 2024.
NAB, for example, predicts the dollar will start rising in value in the New Year to 0.53 GBP by mid next year, before reaching 0.54 by the end of 2024. It is currently trading at 0.52 to the Pound.
