Aussie dollar looks set to match US dollar
Monday, October 11, 2010, 8:08 pm
Consumers will benefit from the soaring Australian dollar, which reached a 27-year high of 99.18 US cents on Thursday night.
While this is good news for importers and those heading on an overseas holiday, other Australians are positioned to lose money.
A stronger exchange rate could cause the cost of exports rise, hurting farmers and other commodities sellers.
The tourism industry is also feeling the effects of the high dollar, as international holidaymakers deem travel in Australia too expensive.
Economist Professor John Quiggin says South East Queensland’s tourism will suffer twofold.
“Both with Australians taking overseas holidays because they’re cheap, and overseas visitors not wanting to come here,” Professor Quiggin said.
Sunshine Coast travel agents report an increased interest in overseas holidays.
“It is a good time to travel and the people that have the budget to do so are defiantly taking advantage of it,” said Natalie Owens.
Generally, a strong Australian dollar means the cost of imported goods fall, which is good for consumers in the lead-up to the Christmas trading period.
Cheaper imports should keep competition high and the price of electrical goods, clothing and business equipment low.
The purchasing manager of Unique Health Products, the Sunshine Coast’s largest health product distributor, said the savings and profits created by a strong Aussie dollar would be passed on to consumers.
“When you’re importing millions of products from the United States, even a cent increase in the exchange rate makes a huge difference,” Bhima Parkes said.
“We can then pass these savings on to our customers through specials and lower prices.”
In an interview with ABC’s Insiders program, Deputy Prime Minister and Treasurer Wayne Swan said Australians should celebrate the strength of the Aussie dollar.
“It reflects our low unemployment rate,” he said.
“It reflects strong investment in the Australian economy and therefore strong growth.”
The Australian Bureau of Statistics reported Thursday a 49,500 rise in the number of employed, leaving unemployment at 5.1 per cent and causing the dollar to jump.
Professor Quiggin says low unemployment figures keep interest rates high, strengthening the dollar.
“We have high interest rates which means interest bearing deposits in Australia are attractive and we have a strong export of minerals, they’re the two primary causes,” he said.
Market watchers are expecting the currency to reach parity with the greenback over the coming weeks.
The Australian dollar has rallied 10 per cent since the start of September against the US dollar, and hit a 25-year peak against the British pound.
“It is also a reflection of the weakness of the US dollar but really our dollar is the strongest it’s been against other currencies for a long time,” Professor Quiggin said.