DOLLAR NEEDS TO FREEFALL, SAYS BIS

DOLLAR NEEDS TO FREEFALL, SAYS BIS

AN ECONOMIC expert warns that many of our major industries could continue to struggle on a global scale if the dollar remains at current levels, arguing that recent falls are not enough to spark a revival in some sectors.

Industry analyst and economic forecaster Dr Frank Gelber, of BIS Shrapnel, says the Australian dollar's strength during the mining boom led to a substantial loss in competitiveness for export and import-competing industries.

"Australia's decline in competitiveness through rising costs over the last decade has been driven by the rise in the Australian dollar from US50c at the beginning of last decade to well above parity a few years ago," says Gelber.

The dollar currently sits at US76c-US78c, which he says is low enough to lead a resurgence in tourism and education, yet still falls far short of being able to invigorate those industries which rely heavily on import and export.

"It's still not enough," says Gelber.  "On our calculations, the dollar needs to be between US58c and US70c for Australian industry on average to be competitive. Some still won't be competitive even when the dollar is below US60c."

Industries most vulnerable to the effects of an inflated dollar include some of the economy's largest, including agriculture, manufacturing and finance.

Trade-exposed industries have suffered through the high-dollar period, putting maintenance on hold and allowing their assets to depreciate.

However, BIS says that if the dollar finds a low resting place soon it will be these industries that lead Australia's competitive revival, in terms of both growth and investment.

"We now know the shape of the recovery in Australia's non-mining industries, including the long-awaited recovery in non-mining business investment," says Gelber.

"There is some possibility of an overshoot if confidence turns against Australia, which would be a good thing for Australian industry and jobs. But we are not holding our breath."

Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support

Crypto staking: a new way to earn passive income
Partner Content
You may be familiar with traditional ways of earning passive income such as trading sto...
Etoro
Advertisement

Related Stories

Monash IVF to enter WA market after agreeing initial $9.4m deal to acquire fertility provider PIVET

Monash IVF to enter WA market after agreeing initial $9.4m deal to acquire fertility provider PIVET

Reproductive care specialist Monash IVF Group (ASX: MVF) has e...

Clear Dynamics secures $35m to grow AI-enabled automated coding solution aieos

Clear Dynamics secures $35m to grow AI-enabled automated coding solution aieos

After increasing its customer base four-fold over the past 12 month...

Square Peg and Blackbird invest $5m in digital business card start-up Blinq

Square Peg and Blackbird invest $5m in digital business card start-up Blinq

With traditional business cards on the brink, the world's predo...

Shares in edtech OpenLearning rise on appointment of M&A advisor IBIS Capital

Shares in edtech OpenLearning rise on appointment of M&A advisor IBIS Capital

Shares in education software as a service (SaaS) business OpenLearn...