Join our investing community

Australian dollar disaster

Discussion in 'The Economy' started by Tropo, 27th Oct, 2009.

  1. Tropo

    Tropo Well-Known Member

    17th Aug, 2005
    The strong Australian dollar is a disaster for Australian manufacturing, and persistent credit restrictions are likely to depress engineering and construction for years.

    These are the two big, possibly permanent, losers from the aftermath of the 'Great Recession', but watching the action in Canberra there’s a sense of Nero Claudius fiddling on his lyre during the Great Fire of Rome.

    Not that Australia is burning – far from it – but profound structural shifts are taking place in this country while our political leaders squabble endlessly and pointlessly about asylum seekers and emissions trading.

    This country has indeed come through the 'Great Recession' in good shape and our resource industries are looking forward to decades of boom on the back of China and India, but that picture masks some difficult and lasting problems. Every silver lining, it seems, has a cloud; complacency is unwarranted.

    In particular the 50 per cent appreciation in the currency from its long-term trading range could drive a manufacturing catastrophe.

    Unions and industry groups are calling for government assistance after last week’s closure of local tyre manufacturing by Bridgestone Australia, but the task is too great for that. A thousand flowers will die if the currency continues to rise, or even stays where it is.
    more .... Australian dollar disaster - Alan Kohler - News - Business Spectator
  2. Billv

    Billv Getting there

    15th Jul, 2007
    Sydney, NSW
    It's not only manufacturing suffering, what about our agriculture & tourism?
    IMO half of the problem is due to the RBA's narrow minded approach to interest rates
  3. Chris C

    Chris C Well-Known Member

    2nd Apr, 2008
    Brisbane, QLD
    Australians will just start having to learn how to compete more with the rest of the world (I know we can) and then hopefully with those proceeds and high currency value we can start buying into Asia, rather than letting Asia buy out us.

    On the bright side from an individual perspective I'm already starting to size up options off investing into some international markets again, as well as am reducing a lot of my business costs as well as expanding as a result of cheaper outsourcing oppurtunties into overseas nations.

    You can't blame the RBA because Australia is full of debt junkie households. Australian home buyers have forced the RBA's hand and now they have to raise interest rates to slow down the expansion of housing based debt (which leads to inflation) not to mention tends to misallocate credit resource to less productive areas of the economy which ultiamtely will stifle our economy over the longer run. So they need to nip it the butt now.

    That said with interest rates being such a boad effect they have the problem of they are also stifling lending to businesses who we need to be actually investing in efficiency and innovation so they can better compete at higher exchange rates.

    Somethings gotta give; the way credit is allocated within the system will need to change going forward.