Currency moves can make or break an economy—but how do we measure Australia’s dollar strength in a world of shifting tides? Enter the Nominal Effective Exchange Rate (NEER), a powerful tool for understanding our place in global trade in 2025.
What Is the Nominal Effective Exchange Rate (NEER)?
The Nominal Effective Exchange Rate (NEER) is a weighted average of a country’s currency relative to a basket of other major currencies. Unlike a simple AUD/USD or AUD/EUR rate, NEER takes into account Australia’s top trading partners, reflecting the broader competitiveness of the Aussie dollar across global markets.
- Weighted: Each currency in the basket is weighted according to its share in Australia’s trade.
- Nominal: NEER doesn’t adjust for inflation—this distinguishes it from the Real Effective Exchange Rate (REER).
- Indicator: A rising NEER usually means a stronger currency overall; a falling NEER signals depreciation.
In 2025, the Reserve Bank of Australia (RBA) continues to monitor NEER closely as trade relationships evolve and global economic conditions shift.
NEER in 2025: Australia’s Currency in a Changing World
Australia’s NEER has been on a wild ride in recent years. The reopening of China’s economy, ongoing tensions with Europe, and the US dollar’s global swings all play a part. In early 2025, the RBA’s published NEER index revealed:
- Volatility: NEER fluctuated between 88 and 94 in the first quarter, reflecting uncertainty in commodity prices and global growth forecasts.
- Key drivers: The Australian dollar’s relative strength against the Chinese yuan and US dollar had the largest impact, given China and the US are Australia’s biggest trading partners.
- Policy implications: The RBA cited NEER movements as a factor in its April 2025 decision to hold the cash rate steady at 4.35%.
With the Federal Budget 2025-26 outlining new strategies for export diversification and the government’s continued support for critical minerals, NEER is set to remain a central indicator for policymakers and market watchers alike.
How NEER Impacts Australians: Trade, Prices, and Everyday Life
Why should the average Australian care about NEER? The answer lies in its ripple effects across the economy:
- Exporters: A higher NEER can make Australian goods more expensive overseas, impacting farmers, miners, and manufacturers. In 2025, a strong NEER has pressured wine and beef exports, prompting calls for targeted support.
- Importers: A rising NEER means cheaper imports—good news for retailers and consumers. Electronics and vehicles, for example, have seen price relief as the Aussie dollar holds firm against the yen and euro.
- Inflation: NEER influences the cost of imported goods and services. With inflation moderating to 3.1% in 2025, the RBA has pointed to a stable NEER as helping to contain import-driven price rises.
- Travel and education: A stronger NEER stretches your dollar further abroad, benefiting outbound travellers and students. Conversely, it can make Australia less attractive for international tourists and students.
For businesses hedging currency risk or households planning overseas trips, tracking NEER trends is more than an academic exercise—it’s a practical necessity.
Looking Ahead: NEER and Australia’s Economic Strategy
The NEER will remain in the spotlight as Australia navigates global uncertainty and domestic challenges in 2025. Key questions include:
- How will shifting demand for Australian minerals and energy affect the currency’s trade-weighted value?
- Will new free trade agreements reshape the NEER basket and weights?
- Can policymakers balance NEER stability with the need for export competitiveness and inflation control?
With the RBA’s regular updates and an increasing focus on currency risk management, understanding NEER is essential for anyone invested in Australia’s economic future.
