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

30/10/09: 'The rise and rise of the Aussie: dollar dazzler or dollar dud?' - 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.

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