Rising Aussie Dollar and your job

[Soft Dough]

I'd hate to be in any manufacturing industry, especially one which has overseas links. Farming I think will be ok.

It is distressing to see that Simon Crean announced something to the media. We all know that ALL good news comes from Kevin Rudd.

http://www.theage.com.au/business/brace-for-a-stronger-dollar-crean-warns-20091110-i6z1.html

I wonder how long the car industry can withstand long term high exchange rates.

Because of poor leadership over the last 2 prime ministers we are definately looking at becoming a country more dependant on mining.

 

[Awesomandy]

My company's revenue is 100% USD. While we get paid in AUD, I can't see us getting a bonus this year.

 

[So_Cynical]

I don't see the big deal...there's alot of stuff sold here that's made in Europe, the exchange rate over the years hasn't affected those imports so why would it overtly affect our exports.

Over the years the AUD has been high and low...people still travel, still buy French champagne and BMW's etc...so i figure they will still buy our wines and beers and cars etc.

 

[Soft Dough]

I don't see the big deal...there's alot of stuff sold here that's made in Europe, the exchange rate over the years hasn't affected those imports so why would it overtly affect our exports.

Over the years the AUD has been high and low...people still travel, still buy French champagne and BMW's etc...so i figure they will still buy our wines and beers and cars etc.

In the past, the exchange rate was not sustained near parity for long, but it seems that this time, it will remain so.

The main problem is that if a company is owned by america and has manufacturing here, they will shut down our plant and produce over there ( as wages costs will blow out ) and even australian companies can now get goods manufactured overseas cheaper. We have examples of this in tyre manufacturing and textiles which made the news.

It will also result in cheaper imported goods, whereas locally produced will remain the same ( or with little decrease ), reducing our ability to compete in the local market.

Does not look good imo.

 

[So_Cynical]

In the past, the exchange rate was not sustained near parity for long, but it seems that this time, it will remain so.

The main problem is that if a company is owned by america and has manufacturing here, they will shut down our plant and produce over there ( as wages costs will blow out ) and even Australian companies can now get goods manufactured overseas cheaper. We have examples of this in tyre manufacturing and textiles which made the news.

It will also result in cheaper imported goods, whereas locally produced will remain the same ( or with little decrease ), reducing our ability to compete in the local market.

Does not look good imo.

Yep i know the argument...bottom line is the Chinese do it (everything) cheaper than everyone so following your classic argument all manufacturing will move there, as it slowly is and has over the years....manufacturing has been a dead duck in all developed country's for decades.

This loss of manufacturing capacity is inevitable so i reckon we shouldn't fight it, as its a losing battle, subsidy's and bailouts while politicly palatable simply delay the inevitable...better to support and create industry's where there can only be limited replication in China and other competitor country's.

Wine is a great example...we do wines well, reasonably low cost, its a reasonably low impact land use, creates lots of jobs where there badly needed, a growth industry and we already have a great global reputation.

The Chinese cant replicate that....Beijing Merlot will never be a goer.:nono:

 

[GumbyLearner]

Wine is a great example...we do wines well, reasonably low cost, its a reasonably low impact land use, creates lots of jobs where there badly needed, a growth industry and we already have a great global reputation.

The Chinese cant replicate that....Beijing Merlot will never be a goer.:nono:

No they have got that covered too!

http://www.ctvbc.ctv.ca/servlet/an/...nery_091107/20091107/?hub=BritishColumbiaHome

Also look at the free trade agreements Chile have entered into with Asian governments. Plenty of grapes in Chile and much cheaper than Aussie producers.

 

[Aargh!]

My company's revenue is 100% USD. While we get paid in AUD, I can't see us getting a bonus this year.

I get paid in $US so it SUCKS!

 

[So_Cynical]

No they have got that covered too!

http://www.ctvbc.ctv.ca/servlet/an/...nery_091107/20091107/?hub=BritishColumbiaHome

Also look at the free trade agreements Chile have entered into with Asian governments. Plenty of grapes in Chile and much cheaper than Aussie producers.

Yeh but its Chilean or Chinese...your missing the point, its like Chinese made BMW's will never out sell the German ones, well not to discerning buyers anyway...u cant make Grange in Santiago.

 

[GumbyLearner]

Yeh but its Chilean or Chinese...your missing the point, its like Chinese made BMW's will never out sell the German ones, well not to discerning buyers anyway...u cant make Grange in Santiago.

What about Chinese consumers who unwittingly buy copies?

I don't mean to be rude, but you're missing the REALITY!

That's right copies. I mean the whole car!!!!

 

[Aussiejeff]

..**snip**.. Wine is a great example...we do wines well, reasonably low cost, its a reasonably low impact land use, creates lots of jobs where there badly needed, a growth industry and we already have a great global reputation. **snip**

Ummm. You might just want to rethink those *statements of fact* after reading this? http://www.news.com.au/adelaidenow/story/0,22606,26332756-2682,00.html?from=public_rss

In REALITY, the OZ wine industry is facing -

(a) a significant decline in profitability.
(b) loss of jobs through numerous closures / mergers.
(c) significant reduction in global reputation with soaring OZ dollar making OZ wines too expensive in US.

IMO the OZ wine industry is in for "a world of pain" over the next 24 months or so at least, with an uncertain future after that for many of the growers who have survived to that point.

Have another one on me.....

 

[boofhead]

The exchange rate has also impacted on UK wine sales. Landline has had a few stories on the matter. UK supermarket chains have specific pricepoints they want to operate at. The Landline site should have archives of the stories.

Beef grows that use exports have had a reduction in sales volumes too.

Paper makers in Australia for a while have been producing more than they can sell - people will buy the cheap Indonesian and Thai paper.

Holden would look a lot weaker if the USA police car deal never happened.

The BMW example is interesting. People with a bit more money will buy the brand names with good reputations and generally a quality product. Many of the consumers will buy the lower end though.

A recent job I had relied on foreign trade - in $US. It did impact on the business although it had other issues too. It closed down.

At the other end I'm sure the imports must be liking the exchange rates. Potentially better margins.

 

[lasty]

Exchange rates make an excuse everytime for poor industry practices.
Did you realise that the Australian dollar was near $1.40 back in 1970's?

Why is it that exactly the same goods can be bought cheaper overseas than here? Its the greed factor.

Australia's produce is first class. Its a pity that most of the best stuff gets shipped overseas and we are left with the dregs.
Once again why feed your fellow man quality when you can get a better dollar for it elsewhere.
Well that may change and I hope the exchange rate goes back to $1.40 because better produce will be staying at home, thats unless they take their bat and ball and go.

 

[Mofra]

Also look at the free trade agreements Chile have entered into with Asian governments. Plenty of grapes in Chile and much cheaper than Aussie producers.

Chilean wines are execllent - came back from Sth America under 3 weeks, ago, and you can buy very decent wines from the supermarket for AUD$3 which would rival the $20 quaffers here. They tend to favour Cab Savs & Carmeniere, which was a grape vareity thought to be lost to the world 100 years ago but grows well in Chile.

On a bus trip from Santiago to Valpariso, I passed plenty of wineries with cellar door facilities that rival most of what we have in Australia. Not sure about how much they are looking to export but teh mass-produced wines in Australia could feasibly be rivalled in export terms by Chile in years to come, although I dare say our premium wines will still be streets ahead of them.

For the record I tried Argentinian and Bolivian wines as well and they were quite drinkable.

 

[gfresh]

The RBA should be more moderate on it's rate rises until the rest of the world has recovered, to prevent further speculation on a higher $AUD.. A high dollar may well have the same effect of slowing the economy by hurting our exporters, and employment as rate rises. The effect may just be slower to be obvious. So effectively they may be double pumping, which could have unexpected consequences in a few months time.

At the moment I have already imported several products direct from o/s due to the dollar, and that is less business going to local retailers. On other forums talk of awash of people importing this and that (and it is very easy through the Internet). If that is a small microcosm, surely this is not good if consumer dollars are flowing directly overseas, rather than locally?

I guess tourism is down the drain now at the moment, but anybody from an outside perspective must be really starting to see Australia as a extremely "expensive" country and not worth visiting or living.

p.s. what would happen to the wine industry without expensive Government support? :bandit: It's yet another poor industry effectively propped up to protect polly's mates and their tax breaks.

 

[Nyden]

The RBA should be more moderate on it's rate rises until the rest of the world has recovered, to prevent further speculation on a higher $AUD.. A high dollar may well have the same effect of slowing the economy by hurting our exporters, and employment as rate rises. The effect may just be slower to be obvious. So effectively they may be double pumping, which could have unexpected consequences in a few months time.

At the moment I have already imported several products direct from o/s due to the dollar, and that is less business going to local retailers. On other forums talk of awash of people importing this and that (and it is very easy through the Internet). If that is a small microcosm, surely this is not good if consumer dollars are flowing directly overseas, rather than locally?

I guess tourism is down the drain now at the moment, but anybody from an outside perspective must be really starting to see Australia as a extremely "expensive" country and not worth visiting or living.

p.s. what would happen to the wine industry without expensive Government support? :bandit: It's yet another poor industry effectively propped up to protect polly's mates and their tax breaks.

The RBA cannot afford to not raise rates. Completely irrelevant of the effect it has on exporters - it's all about inflation, or in short - house prices. If rates are not lifted quite quickly, and drastically - median prices will very quickly get out of control.

 

[gfresh]

bah.. RBA trying to fight stupid Government which is a never-ending battle. Fix the f'ing tax system for property!

 

[Bushman]

The USD carry trade will unwind with gusto in the not too distant future and this will pop the Aussie 'commodity' dollar bubble.

 

[Smurf1976]

The RBA cannot afford to not raise rates. Completely irrelevant of the effect it has on exporters - it's all about inflation, or in short - house prices. If rates are not lifted quite quickly, and drastically - median prices will very quickly get out of control.

You mean to say that median house prices around 7 times average earnings, roughly double their historic price relative to incomes, aren't already way out of control?

Mandatory 20% deposits on all home loans would promptly restore sense to the real estate market without the need to hike interest rates. It would fix the whole shonky mortgages issue that nearly brought down the financial system too.

 

[Nyden]

You mean to say that median house prices around 7 times average earnings, roughly double their historic price relative to incomes, aren't already way out of control?

Mandatory 20% deposits on all home loans would promptly restore sense to the real estate market without the need to hike interest rates. It would fix the whole shonky mortgages issue that nearly brought down the financial system too.

Yes, but how would this be regulated? Would this be a government initiative? Ha. As though any federal government would do that ... you'd have stories all over that rubbish show A Current Affair, about how the government is keeping them from buying a home.

As far as I know, the RBA does not have the power to implement this requirement. The only power they really have, is to tighten monetary policy.

To your other point, of course they're already out of control, but does this mean we keep letting it happen? With minimal supply, the only real way to reduce prices (not merely stagnate them) is to hurt first-time home buyers. Bankrupt them, in waves - and we'll finally have some reprieve. Of course, we would simply release more land, build more homes, but again - the corrupt government isn't going to do that. Therefore, again - it's up to the RBA.

Basically, to lower prices - one way or another, will hurt people. There's no way it cannot. So, we simply need to accept that - and get on with the hurt.

 

[Smurf1976]

The USD carry trade will unwind with gusto in the not too distant future and this will pop the Aussie 'commodity' dollar bubble.

Long term I do think the USD is worth nothing more than its value as fuel, insulation, toilet paper or bedding for small animals (or any other use you can find for lots of small pieces of paper).

But in the short term, there are just a few too many bears predicting imminent collapse for it to be likely right now. A decent rally in the USD will happen at some point in my opinion - but that doesn't change the reality of it being doomed in the long term.