Appliance and consumer electronics suppliers in particular smaller distributors are facing a new problem, with the dollar tipped to hit $0.60 cents by Christmas resulting in new price pressure on imported goods.
Currently at $0.64 suppliers are now having to also factor in increased freight costs due to freight Companies such as TNT moving to lift the cost of freight due to increased overheads such as wages.
This week TNT notified distributors of new price rises which one major audio supplier told ChannelNews “Is going to have to be passed on”.
Australia’s dollar has fallen against several currencies already this year, such as the euro and the US dollar.
It only rose against the Japanese Yen, New Zealand Dollar, Norwegian Krone, Korean Won, Turkish Lira and South African Rand.
Back in February 2023, 1 AUD was worth more than 0.71 USD.
At the start of COVID we were trading at $0.80 to the US dollar.
Commonwealth Bank currency strategist Kristina Clifton is among those who think it could fall far lower.
“So, the Aussie dollar has weakened this year, if we just think back to mid-July, when it was at its recent peak has actually fallen about four and a half cents against the US dollar,” she says.
“We’re now seeing a risk that it can potentially fall below (US) 60-cents in the near term”. she spoke.
Two main factors are at play. The US economy’s surprising strength has led to expectations that the federal reserve will raise its key interest rate again beyond the July increase to a range of 5.25%-5.5%.
In Australia, the Reserve Bank left its cash rate unchanged at 4.1% since June.
Two batches of weak data – from modest wage increases to an uptick in the jobless rate – have reinforced expectations lately that the RBA’s work is done.
The difference in those two interest rates – which might yet widen further – will steer investors to buy US dollars and sell Australian dollars.
The other issue affecting the Australian dollar and the Australian economy in general, is China’s surprisingly weak economic rebound from its severe Covid lockdowns. Deflation in July – contrary to the price issues mostly elsewhere – has only stoked those concerns.
The Australian and New Zealand dollar are often seen by investors as a proxy for China because of the economy’s trade exposure.
Australia’s exports to China (including Hong Kong) are about as large as the next four partners combined.
The RBA cited “China’s uneven recovery from Covid-19 restrictions” as the top of its list of “key domestic uncertainties” in its latest quarterly statement of monetary policy.
