Sharon Williams Blog

The rise and rise of the Aussie: dollar dazzler or dollar dud?

30/10/2009 2:46:00 PM, Sharon Williams Prev Next

By Sharon Williams

Over the last few months our Aussie ‘battler’ dollar ‘has king hit the once-mighty greenback.

That’s led to Aussie expats selling their homes to buy overseas; individuals stocking up on pounds and US$ for their next overseas trips; extreme pressure being placed on anyone that derives earnings from overseas; and the same pressure on exports causing losses for Aussie companies.

The Aussie dollar has increased in value by 53% this year against the US dollar, choosing a rollercoaster as its preferred mode of transport. Wild times, but fascinating stuff.

What does it mean for us?

So what are the implications of the strong Aussie dollar for businesses? If you run an SME be aware and pre-warned if you deal with these industries.

Anyone earning money from overseas will be increasingly under pressure because they’ll get less cash in the conversion and become less competitive in international markets. So industries such as mining will suffer as well as companies like BlueScope Steel, PaperlinX, Australian Worldwide Exploration, Caltex, Incitec Pivot, Aristocrat, Boart Longyear, CSR, SGM, Resmed, Ansell, BKN, Axa and CSL, according to observers.

The travel industry, slowly emerging from the threats of the cuts in travel plans, and swine flu, could also do without a strong dollar, which makes it more expensive for international visitors to come to Australia (and cheaper for Aussies to head overseas).

On the flip side, the strength of the Aussie dollar is great news for importers and stocks such as airlines who are benefitting from lower US dollar oil prices and stronger outbound tourism. Winners, according to Goldman Sachs include brands such as Qantas, Virgin Blue, Pacific Brands, Boral, Brambles, Transpacific, Coca Cola, Alesco and GWA. And note, it’s interesting that a US5c move can boost earnings by at least 2%. Good news is that retailers will benefit from cheaper imports and services businesses, such as advertising may get a positive lift as increased consumer confidence encourages promotion of product and services. Good for my marketing and PR agency!

And don’t think just because our dollar is doing well, things are all rosy. Aussie business confidence in September has just declined for the first time in around five months. And a recent NAB business confidence survey that rates a range of small through to large sized companies had its business conditions index fall from 4 to 3 in September.

Around this time, a survey by think tank, the Reputation Institute mobilised the Trade Minister, Simon Crean to create a $20 million project to develop ‘Brand Australia’ – a new project to re-brand Australia to encourage investment.

This was because the survey revealed that although foreigners acknowledge Australia for its world-class lifestyle they mark it down as a place to do business, the quality of its products and services, its government and its contribution to the global economy. It is reported that responding to the survey's results, a spokeswoman for Austrade said Australia needed to ''leverage this confidence we have in ourselves'' for the new brand.

We are clearly living in volatile times.

Recently we’ve seen the sharemarket retreat, interest rate rises are predicted in the coming months and the dollar’s rise is being lauded and harassed depending on where you sit and what you do. And tomorrow it could all be completely different. What I’d give for a crystal ball...but, seeing as they’re a bit unreliable, and I’ve heard good ones are hard to come by - I’ll ask you.

Where’s the economy headed in your opinion? Should we buy or sell? Fixed or variable? Holiday locally or head overseas? Maybe it’s us, the people (that actually do the work), that will predict the future. Frankly, I think it’s anyone's guess.

Sharon Williams is chief executive of Taurus Marketing and is on the board of the Australian British Chamber of Commerce and the American Chamber of Commerce Women in Management

What do you think? Where are the dollar and the economy going next? What's the best thing about a strong dollar? Have your say by commenting below

User comments

The high Aussie dollar is a nightmare for our export revenues. Our farmers, manufacturers, miners simply get a reduced income in Aussie dollars since the sales are made in US dollars. This is bad for Australia's balance of payments and overall income. It hurts all our exporting industries. China keeps their yuan artificially low and makes a massive surplus on trade. It's high time that our Gov't, the treasury and the RBA connected together to address the problem.

Let me see. Aussie dollar rising against the British Pound. My three bedroom semi-detached dogbox set to be worth more than half a million within a couple of years. Meanwhile a semi-detached dogbox in some rural community in the UK would be less than AU$150,000. Looks like I can retire back to Devon or Dorset run a pub and put my feet up before I turn 45. Gee thanks Australia!

So borrow US$ and invest in Australia - the NEXT bubble to burst

A year ago i decided to become the fastest aussi solo circumnavigator sailor. While the $ plunged i watched my dreams fade as suitable yachts soured beyond my financial reach. now however i sit in England listening to the poms mown about the value of the pound compared to the Euro and i think welcome to the real world. For years wherever we travel the $ is low and overseas expensive. Why is the $ low Australia is awash in resources , Wool, wheeat, Iron, coal and Uranium, Gold and Diamonds even amongst many other resources to numerous to list. I say go Aussi. Ps. I have with the strong dollar now secured a very suitable yacht for my challenge that will be a great asset for Australia for years to come.

We as consumers are the big losers with the higher Aussie dollar. Who has noticed petrol prices dropping 53% due to the higher Au$? Who has seem imported goods dropping 53% due to the higher Au$? Let me guess.... No-one. The Aussie dollar is approaching parity with the US$ but if one ventures onto international websites looking at the price of goods there is still ar merked difference 30-50% cheaper even counting the exchange rate. eg You can buy Windows 7 in the US for $229 (AU$250 approx) but it costs $370-400 here -- who is getting the benefit of the stronger Aussie dollar ??? It is certainly not the Australian buying public. Just look at the banks -- did anyone see the reports in the newspapers lately that their profit margin on home loans has gone from 1.9% to 2.8%? If they are getting credit from overseas as they claim, then a 53% stronger dollar makes their repayments 53% cheaper. Are the people with homeloans getting any benefit? I'll let you decide who the winners are.

The Aussie dollar is just about where it should be.Arround half the British pound.and just a little bit high against the dollar.if u change your aussie for British you'll get arround .52 pence and the American arround .86c.The thing is the aussie was so low in the Howard boom years it was under valued.At one time .34 against the pound and 59 against America.Even with the strongest banks,and strongest economy in the world.It's only with theGFC the aussie went up.It wont last.If Australia's unemployment gose up to 8% the aussie wont be worth the paper it's printed on.Don't forget America still has 90% EMPLOYED,theUK has 93%EMPLOYED .Australia's cost of liveing is DOUBLE to thiers.SO who is worse off?????

What's an SME? I don't normally read business articles. We should always holidays locally. The prices are still the same and it helps keep tourism in business. Not many countries that offer a wide variety of ideal climates like Australia.

Does anybody realise just how fragile (or bankrupt) the world economy is at the moment? I seem to drone on ad-nauseam about Credit Derivatives yet I never hear anyone else mention them. Bankers don't. Governments certainly don't and people and the street don't have the foggiest. There is a shadowy, underworld, unregulated and almost black-market CREDIT DERIVATIVE economy that runs at over US$450 TRILLION (according to Sky Business, Bloomberg, Fox and CNN). Last year it was estimated at (only) $58 TRILLION so where are we going to be next year? The Aussie economy?? That's like a child's piggy bank with coins in it compared to Dad's checking account. The word "trillion" is soooooo 2009. Just wait for next year when they start mentioning "quadrillion".

Who would think a year ago our Aussie dollar would be at its current levels. If you look back at the last two worldwide recessions, (2000-2001, 2008-2009). What was one thing that was immediately dumped in fear of world wide recession?. Commodity based currencies especially the Aussie. However Australia avoided recession on both accounts. The low Aussie obviously helped, as it provided a competitive market for our products in a tough environment. In Sept 2008 the aussie was in free fall as investors ran for cover for the $US. Even though the US economy was heading for financial ruin. It did not take long for the market to correct itself, however the 5 or six months of low aussie value, once again aided to avoid off a recession. The market is a "panic palace" and the high Aussie dollar at the moment is proof that investors maybe start to changing their ways, and find commodity based units are a safer bet then a tangled and unfavourable US banking system.

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