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Overview

The Australian Dollar (AUD), informally called the Aussie, is the official currency of Australia and several Pacific island nations including Kiribati, Nauru, and Tuvalu. It is one of the most traded currencies in the world, consistently ranking fifth or sixth by daily foreign exchange volume. The AUD is managed by the Reserve Bank of Australia (RBA), which targets inflation in the 2–3% range.

Like the Canadian Dollar, the AUD is strongly tied to global commodity markets. Australia is a leading exporter of iron ore, coal, gold, and natural gas — particularly to China, its largest trading partner. When commodity prices rise or Chinese demand strengthens, the AUD typically appreciates; when they fall, it weakens.

History

Before 1966, Australia used the Australian pound, inherited from the British colonial era. On 14 February 1966 — Valentine's Day — Australia introduced the Australian Dollar as part of decimalisation, replacing the pound at a rate of two dollars per pound. The introduction was accompanied by a major public education campaign, including a song called Dollar Bill to help citizens memorise the new denominations.

Initially pegged to the British pound and then the US dollar under the Bretton Woods system, the AUD was floated in December 1983 under Prime Minister Bob Hawke and Treasurer Paul Keating — a landmark economic reform. The float exposed the dollar to market forces, making it one of the first major currencies to be fully liberalised. Today the AUD is freely convertible and one of the most liquid currencies in the Asia-Pacific region.

Reserve Bank of Australia

The Reserve Bank of Australia (RBA), established in 1960, is responsible for monetary policy, financial system stability, and issuing Australian banknotes. The RBA's mandate is to maintain low inflation (2–3% on average over time), support full employment, and contribute to the economic prosperity of the Australian people — a broader mandate than many other central banks.

The RBA Board meets eleven times per year to set the cash rate target, the key instrument of monetary policy. Australia's close economic ties with China and the Asia-Pacific region make the RBA's decisions highly sensitive to global growth trends, particularly Chinese demand for commodities.

Key Facts

• Australia introduced decimal currency on 14 February 1966, replacing the Australian pound at 2:1.
• The AUD is the fifth or sixth most traded currency in the world by daily volume.
• Australian banknotes were the first in the world to be made of polymer plastic (introduced 1988), developed by the Reserve Bank and the Commonwealth Scientific and Industrial Research Organisation (CSIRO).
• The AUD is often called a commodity currency: iron ore alone accounts for a significant share of Australia's export earnings.
• China is Australia's largest trading partner, making the AUD sensitive to Chinese economic data and policy shifts.
• AUD/USD is one of the most popular currency pairs in forex trading, commonly known as the Aussie pair.

See also: USD – United States Dollar · Guide