Friday, 2 November 2007

How has the soaring dollar affected you?

In recent months, the humble Australian dollar is soaring against the American. Today, 1 Australian dollar will purchase about 92 American cents, and the financial commentators are predicting that it may reach parity before year end.

What does that mean for the average man on the street? We will have to look at it from two perspectives. There is the perspective of the consumer, that is how our spending habits may change. There is also the perspective of the worker, that is how our jobs and work is going to be affected.

Spending the dollar

The majority of the products that we purchase, especially the manufactured products such as plastic goods, electronics and cars, are manufactured overseas. The goods being imported into Australia should be a deal cheaper, when compared to the start of 2007 where the Australian dollar only was only buying 78 American cents.

I think for the big value items such as cars, it will take a period of time before the current stock are sold and the new stock purchased at the higher exchange rate.

There are already some products that are already being sold at a lower price, such as computer software where the turnover in stock is a lot quicker.

For primary products like fresh fruits and vegetables, the current pricing is high because of the drought, and should not be that depending upon the exchange rate.

One of the products that I wish were more dependent upon the exchange rate is the price of fuel, but for some reason, it is always been high for one reason or another. The oil company always seems to have some reasons.

Earning the dollar

If you are working in an export industry, such as manufacturing or the resources, it will be harder to sell your product overseas as it will be expensive for them to purchase them from the Australians. However it seems that the Chinese is not perturbed by the high exchange rate and buying our coal and others as fast as we can dig them out of the ground.

In some ways, some of the raw materials that goes into the manufacturing industry are purchased from overseas, so the price of these raw materials will be cheaper, and perhaps, the cost of the manufacturing may also be cheaper. It all depends on how and what goods are manufactured.

The bottom line is that job security for the man on the street may be an issue if the Australian increase further. So be prepared.

The increasing Australian dollar will affect people in many different ways. How has the changing currency affected you?


Thiru said...

I have just put hold on Adsense income (LOL)..becoz, as of today 1 AUD = 1 USD. But, you can pay subscriptions to Websites, renew your domains etc using Australian Credit card..

louise said...

this has had an affect on my husbands small new business as he is importing a product from US. He just spent his entire profits to date on new stock. When he started the dollar was at about .85 cents so we plan on investing in stock while the dollar is good.

Pixal said...

My print machine that I imported in early 2006 (72 cents in the dollar US$70,000)is now theoretically worth 20% less but its just the idea that i could have got it so much cheaper, and now I am paying interest on all that extra money, it sucks. :(

tehnyit said...

@pixal and louise, that is really painful. Unfortunately, the foreign exchange is something that is out of our control.

@thiru, its funny that you mentioned this. I also just checked my adsense and I just clicked over the $10 mark, or should that be clicked below $10. :-)

Colin said...

Just two quick nitpicks, firstly the US dollar is pretty much the only currency the Aus dollar is rising against. Exports to the US are the only ones effected.

Next, a rising of the Aus dollar vs the US is actually better for exports, in my view. US produces more capital developing equipment (farm gear, bio tech stuff), which we can turn into a product, and export to non-US countries.

Andy said...

A rising dollar is not a good thing overall, espically against the US$. The rising $A is more due to a falling US$ - which is a symptoym of a weaking US econonmy. This is not good for Australia in the long term

Anonymous said...

Actually, many industries around the world are getting their material based on U.S. Dollar.

As USD weakens, the production cost will certainly be somewhat lowered and they would certainly fight their way to export toward countries, which are going strong against U.S. Dollar, like Aussie, Canadian, Poundsterling and so on.

This surely is causing shift of tendency all over the world and not only in Aussie.

J.C. Carvill