Strong Aussie dollar hits manufacturers


Australians travelling overseas are benefiting from our stronger currency but the rise in the local dollar is squeezing the nation's tourism and manufacturing industries.

And an economist says relief is unlikely to come any time soon, given the spectre of the Reserve Bank of Australia (RBA) lifting interest rates further as the economy continues to improve.

"The impact of the higher Australian dollar on the tourism sector and also on exports is you are effectively cramping and downsizing two major areas of the Australian economy," CommSec economist Savanth Sebastian says.

The Australian dollar has recently traded between 91 US cents and 93.30 US cents, an appreciation of around 35 per cent from a year ago.

Mr Sebastian said Australian manufacturers that export were feeling the pinch from the stronger currency.

"There will be a lot more manufacturing that will move offshore because they cannot compete with the higher Australian dollar," he said.

Mr Sebastian expected the RBA to lift the cash rate by a quarter of a percentage point, to 4.0 per cent, at its next board meeting on February 2, following stronger-than-expected economic data recently.

"You could expect another one in March," Mr Sebastian added.

"There is no doubt that the rate hike will add further flavour to the Australian dollar and continue its upward leg."

Australia's unemployment rate fell to a eight-month low of 5.5 per cent in December, while retail sales rose 1.4 per cent in November, ABS data showed.

The RBA lifted the overnight cash rate by 25 basis points to 3.75 per cent in December, following similar moves in October and November.

Australia's key benchmark rate compares favourably to the US federal funds rate of zero to 0.25 per cent.

Official interest rates are at one per cent in Europe and 0.5 per cent in the UK.

Related news & editorials

  1. 21.06.2019
    by      In
    Australian bicycle manufacturer Bastion Cycles produces high-performance road bikes that use filament-wound carbon fibre tubes and a modular design for titanium lugs. For the first three years of operation, Bastion outsourced production of the lugs to RAM3D, an additive manufacturing (AM) provider... Read More
  2. 18.07.2018
    by      In
    3D printing with metals is affecting the way manufacturing occurs, and Australian distributor Raymax Applications reckons this is amply demonstrated by the application of SLM Solutions machines in metal manufacturing processes.
    SLM Solutions Group recently released its fourth generation 280 system... Read More
  3. 16.03.2018
    by      In
    In the 1960s, as much as a quarter of Australia’s workforce was employed in the manufacturing sector, and the industry fuelled 25% of the nation’s economy, according to the Productivity Commission. Half a century on, the closure of Toyota, Ford and then General Motors in October 2017 seemed to... Read More
  4. 24.01.2018
    by      In
    According to Southern Cross CEO, Mark Ferguson, if Australian industry really wants to get serious about saving energy then it needs to take a close look at ‘two-stage’, air compressor technology. As energy costs continue to outstrip other business input expenses it is critical, more than ever... Read More