Dollar Drop Prediction To Send Shivers Down Retailers’ Spines
A forecast of the Aussie dollar slipping to 64 US cents could send shivers down the spines of local tech firms sourcing products and parts from overseas. That includes retail outlets.
The dollar currently stands at US67c, so a value of US64c or below would represent at least a 4.5 percent drop. The prediction comes in an ongoing climate of inflation and economic uncertainty, and hardship in the Australian retail sector.
A survey of retailers this month by the Australian Retail Association and American Express found that only 34 percent of local small retailers felt confident about their business performance as they head into the 2023-4 financial year.
The problems ahead included “a spending slowdown, coupled with the rising cost of doing business, all taking place alongside the largest set of government reforms in decades and a retail crime wave that is impacting the wellbeing of workers and the bottom line of companies,” said ARA chief executive Paul Zahra.
“This occurs whilst retailers are grappling to stay competitive on e-commerce and distribution and invest and innovate in areas such as sustainability. Labour and skills shortages remain a key challenge.”
Complicating things further is a National Australia Bank prediction that house prices will continue to rise throughout 2023 and into 2024, according to its quarterly Australian Residential Property Survey released last week.
“We have revised up our expectation for dwelling prices based on the recent resilience and outlook for strong housing demand in the near term, while supply growth continues to be challenged by higher rates and supply side pressures,” says the NAB.
Increased house prices will in turn put pressure on the Reserve Bank to keep raising interest rates.
There is one comforting thought. When it comes to the dollar dropping, the Commonwealth Bank has a habit of making such predictions. In March, ChannelNews reported an even more dire outlook, when the CBA said the dollar could drop below US60c due to the current global banking crisis.
“We do not want to be alarmist,” said Kristina Clifton, senior CBA economist, “but the Australian dollar can fall below US60c in a worst-case scenario,” she said at the time.
She said then that central banks and governments would restore the dollar’s value if it fell below 60 cents.
But this is little consolation with inflation still a major issue, the housing market still overheated and no likely stabilisation of the world economy soon due to war and now an economic slowdown in China, our major trading partner.