What's your prediction on the Australian Dollar?

[leadman]

What exports other than minerals and food. we just don't make anything any more. We don't even turn our minerals in metals. still think .85 to .88 is about right....

 

[Flashback]

I for one am looking forward to a cheaper next trip to Aus!

 

[MikeV8]

I'm looking at buying a US made car (Jeep Cherokee) due out here very late 2013. I'm hoping it won't be too late, and our $ bleeding at the time.
Jeep.com.au pricing (looking at Grand Cherokee, as the Cherokee has no pricing yet), the price changes on a daily basis for the same config.
So, I think Jeep have hooked their calculator to a currency converter and quotes RRP in very near real-time.

Too much technology in play now !
I need to find an old-school dealer/salesman with a printed price list (and behind on end of quarter targets).

Ditto on Travel agents !
A Norwegian cruise we did US/Caribbean Jan/2012 at $3000, same cabin/itinerary in Jan/2014 is now $6000
And the flights (QF awards) J-Class SYD/JFK and MIA/LAX/SYD were total $600'ish (2 pax) in fees/taxes, now double that.

 

[grubbidok]

What exports other than minerals and food. we just don't make anything any more. We don't even turn our minerals in metals. still think .85 to .88 is about right....

Um.. financial services, education, tourism to name but a few. All of which offer greater (and smarter) profit margins than manufacturing and bring in foreign cash. All but high-end manufacturing (think the German model) won't really work in Australia irrespective of the dollar as the market is too small and we are just too far away from anywhere (even though we're called 'close' to Asia, we're still very far away). That's just the way the world is going.

There are also reams of reports showing that the next global 'boom' will be an agricultural one, which Australia is well-placed to ride just as much as the mining one. As it is agriculture already accounts for over twice the GDP of mining (in gross and in growth). This isn't just cows and sheep, but Australia is seen as a good high-end safe pair of hands for drug raw materials like poppies for narcotics in Tasmania or Dubosia for IBS drugs in NQ; hell, even essential oils are produced for the international cosmetic industry; wine; biofuels. There are also significant 'value-add' components (manufacturing!) attached to these. Agriculture is more than just food and both employs more and pumps in more to the economy than exports do. The stereotype of the simple farmer types or uncomplicated products is not a fair one.

Another thing often forgotten in discussions of the Australian economy is just how much superannuation has done to stimulate it as well. Super funds are awash with cash to invest and basically make Australia a shareholder economy. Although not unique to Australia, the scale is certainly larger than most countries.

Everyone talks about mining being the be all and end all but no-one talks about the slow and painful reforms of the last 20-30 years that are finally bearing fruit in the Australian economy. It just so happens we've been whacked with good fortune twice over. The mining boom really peaked (in terms of what it gave to Australia) during the Howard years, the current mining 'drop' isn't production as much as lower infrastructure development (and there are plenty of other things to build, and a lot of superannuation funds desperate to find projects to fund - construction will make up for it). The foundational strengths that meant we didn't go under in the GFC, a strong service sector replacing the manufacturing economy - that's still going (despite rhetoric).

That's been bubbling along for a while now. It was only post-GFC that people fully understood the resilience and strength of the Australian economy and started viewing the AUD as a safe-haven. It wasn't because China's buying our dirt. Mining might make a lot of money, but not all of it circulates back through to Australia. It employs relatively few people, and frankly tax breaks and corporate structures mean it doesn't pay its fair sure into the actual Australian economy either, not at the level other industries do. All a collapse in exports will do is remind Australia that there are other parts of the economy as well.

Also, if the LNP can keep their hands off the NBN when they get in Australia's traditional enemy (the tyranny of distance) will also be defeated, and we'll start seeing another boom as people across Australia are able to develop start-ups and a service industry boom begins. It could (*should*) be the start of a rural service industry renaissance.

It might pop under 0.90 temporarily (though I doubt it). But you'd better prepare for a parity future. I am and recommending all my clients do too.

Excuse the long-winded replies - I've finally found a thread related to my work and I get a bit over-excited

 

[blackcat20]

Im just glad my September trip is all paid for, it's just the spending money that's taking a hit...

 

[leadman]

Been through too many booms and busts in the mining and metals industry, the .49c dollar looked good!!! I will stick by my 0.85 to 0.88 as "fluff and guff" industries like financial service don't drive the economy aka USA. Even worse is Australia has become too expensive, when its cheaper to get you hair cut in London than in Melbourne!

 

[Flashback]

Been through too many booms and busts in the mining and metals industry, the .49c dollar looked good!!! I will stick by my 0.85 to 0.88 as "fluff and guff" industries like financial service don't drive the economy aka USA. Even worse is Australia has become too expensive, when its cheaper to get you hair cut in London than in Melbourne!

My haircut is much, much cheaper in London than Perth....

 

[sumthinfornuthin]

So something going on every day?

Sorry cant help but laugh. Yesterday investor confidence was high. Today investor confidence is low. Tomorrow investor confidence is high for other reasons. And then investor confidence low again, and then high again and so on.

Yes I am naive but I find it strange that investor confidence can change that many times a week or even that many times a day.

that's why some people make lots of money courtesy of the lemmings who madly follow the media and panic

 

[777]

Austerity .... so sick of hearing that word in the UK.

The coalition here is not using the word but cuts to government spending, cuts to public sector jobs, winding down government sector investment in infrastructure, and a return to surplus as the highest priority are very clearly what is being argued for. Putting personalities or party politics aside, it's not a prescription that is working very well anywhere right now.

I really wish we were having a debate about policy rather than this nonsense (on all sides) right now. Very clearly though the markets are pricing in a slump in the Australian economy and a drop in interest rates - which are the inevitable effects of the promised fiscal contraction.

To be fair Hockey for his part seems to back pedaling slightly from his surplus-surplus-surplus rhetoric but they have spent so long setting that ridiculous benchmark that if we were to take them at face value we risk a death spiral of declining private investment (wind down of the mining boom) leading to decline of government investment (because the coalition is arguing fiscal policy should be to reduce spending not increase it in the face of a depressed economy) leading to a broad based recession.

 

[markis10]

i suppose it depends how you classify it... but interest rate drops have a massive effect on the value of the dollar. our currency was appealing when rates were high, not so much after the latest cut....

Interest rates are part of the inflation metric, but only one part. I note nothing happened in Australia overnight yet the dollar shot back up tracking the Dow . When you have the 5th most traded currency in the world but your economy is ranked 19th by GDP, its rarely about what happens here.

 

[serfty]

This morning the Aussie has increased by a ratio of 3.5% against the greenback compared to the the low earlier this week of 93.3¢.

 

[phred505]

What exports other than minerals and food. we just don't make anything any more. We don't even turn our minerals in metals. still think .85 to .88 is about right....

Main part of our problem is that we don't have a government (from any persuasion) with any vision for the future. There are plenty of niche markets and high tech. industries that we could be producing for the world market (viz. Cochlear) but we don't have a "leader" who has any interest; it's as if "we" are being told what our role in life is.... and producing cars in Australia is not such an industry!

 

[eastwest101]

There are also reams of reports showing that the next global 'boom' will be an agricultural one......There are also significant 'value-add' components (manufacturing!) attached to these. Agriculture is more than just food and both employs more and pumps in more to the economy than exports do. The stereotype of the simple farmer types or uncomplicated products is not a fair one.

Agree that agriculture has potential in Australia, once we get irrigation and other issues like beef exports to SE asia sorted out.

Another thing often forgotten in discussions of the Australian economy is just how much superannuation has done to stimulate it as well. Super funds are awash with cash to invest and basically make Australia a shareholder economy. Although not unique to Australia, the scale is certainly larger than most countries.

All superannuation needs to be invested with a profitable return, but superannuation funds have been reluctant to fund more in more long term/risky/difficult investment categories. Much easier to just buy yield stocks like banks and telstra and collect the fees on the way through.

Everyone talks about mining being the be all and end all but no-one talks about the slow and painful reforms of the last 20-30 years that are finally bearing fruit in the Australian economy. It just so happens we've been whacked with good fortune twice over. The mining boom really peaked (in terms of what it gave to Australia) during the Howard years, the current mining 'drop' isn't production as much as lower infrastructure development (and there are plenty of other things to build, and a lot of superannuation funds desperate to find projects to fund - construction will make up for it). The foundational strengths that meant we didn't go under in the GFC, a strong service sector replacing the manufacturing economy - that's still going (despite rhetoric).

Reforms of the last 20-30 years is a valid point, all to do with improving efficiency, floating exchange rates, some tax reform, privatisation, freeing up the labour market, removal of tariffs resulting in a more open responsive economy - I think Hawke, Keating Howard and others like Button and Kennett can take credit for that, certainly not the current government. You also fall for the same lazy argument that either the resources industry thrives or the rest of the economy thrives but not both. You know this is nonsesne on many levels. For instance the high AUD hurts everyone who is trade exposed from manufacturers, to agriculture, to services, to (yep you guessed it) - mining. Others agree that the mining construction boom is slowing, this means that all the construction jobs that were saved by the Rudd government throwing money around like confetti building overpriced school halls flowed through to higher costs for construction everywhere, hence expensive infrastructure and lower housing activity and cost blowouts in the resources industry. The GFC was avoided by a stronger and less leveraged banking sector, a massive resources boom fueled by China growth, employers holding onto employees, the federal government throwing Costellos surplus around like confetti. And if you run a business dependant on discretionary income from various industries, how do you think that job losses and reduced investement will affect your business. All parts of the economy are interconnected to a greater of lesser degree but in a small trade exposed economy like australia you would be foolish to argue that any one industry is the "be all and end all".

.... It was only post-GFC that people fully understood the resilience and strength of the Australian economy and started viewing the AUD as a safe-haven. It wasn't because China's buying our dirt. Mining might make a lot of money, but not all of it circulates back through to Australia. It employs relatively few people, and frankly tax breaks and corporate structures mean it doesn't pay its fair sure into the actual Australian economy either, not at the level other industries do. All a collapse in exports will do is remind Australia that there are other parts of the economy as well.

Not quite true - some critics of the stimulous were warning that it was too big and an over-reaction. You seem to also conveniently ignore that due to slow economic activity in Japan, Europe and the US that they have cut interest rates to almost 0% and have been running the printing presses 24/7. Are you suggesting that these things haven't affected the value of the AUD? As for the mining industry not paying its way - Swan tried to argue that in 2010 - and he was found out so I think you may want to do some homework there. If I remember correctly its been companies like Google and Starbucks that have been making the news about minimizing tax lately. If you want to argue that a collapse in exports is good for the economy - then go and tell your mates in farming or manufacturing and see what they think about that.

Also, if the LNP can keep their hands off the NBN when they get in Australia's traditional enemy (the tyranny of distance) will also be defeated, and we'll start seeing another boom as people across Australia are able to develop start-ups and a service industry boom begins. It could (*should*) be the start of a rural service industry renaissance.

Cargo cult NBN mentality at work here, confused idealistic dreams. What are preventing these mythical start-up service industries now? Nothing. Every other country in the world has a mixture of incrementaly improved FTTN and then FTTH mixed with other technologies like satellite and wireless without creating a huge publicly funded monopoly. Are you suggesting lots of rural people will all be developing iphone apps or developing high end intensive graphics/effects? I would have thought that they would be running real business - maybe perhaps providing real actual products to the local and overseas markets. It may be news to you, but with a small population and high labour costs and relative high cost of doing business - Australia is not going to be the IT engine room for the world, sure we may have a small and valuable IT industry but its no more important to our economy than retail, banking/finance, services or construction, or agriculture or mining.

The "tyranny of distance" argument is also a bit old and tired with decreasing world costs but increasing domestic costs in shipping and transportation (products), affordable airfares (people) and the internet (data and information).

It might pop under 0.90 temporarily (though I doubt it). But you'd better prepare for a parity future. I am and recommending all my clients do too.

Excuse the long-winded replies - I've finally found a thread related to my work and I get a bit over-excited

Difficult to predict the future of the AUD, if it does pop under 0.90 then it may help all the trade exposed exporters from miners to farmers with the caveat that cost of imports does not fuel inflation too much. But with your understanding of economics and trade I would be a little concerned if I was one of your clients as you may need to have a little lie down and then broaden your research horizons a bit...

 

[eastwest101]

Main part of our problem is that we don't have a government (from any persuasion) with any vision for the future. There are plenty of niche markets and high tech. industries that we could be producing for the world market (viz. Cochlear) but we don't have a "leader" who has any interest; it's as if "we" are being told what our role in life is.... and producing cars in Australia is not such an industry!

Heard one of the Cochlear managers on RN complaining about the current governments attitude to business, he would not be Robinson Crusoe with that one.

Agree about vision, some people think its about "picking winners" like the NBN or windfarms, but governments have a proven ability to pick the noisiest losers - like car manufacturing. Would be good if a political party was honest enough to say that "we cannot pick winners, we will provide the following necessary services and collect the following taxes to fund these services and then get out of the way and leave it to market economics as to where economic growth comes from."

Maybe allow the pie to grow rather than redistribute the pie....

Wouldn't that be strange? :shock:

 

[Craigie]

I'm going to spin a slightly different view on this, some of you will appreciate, some of you will dismiss it.

From a technical chartist point of view.

Just 1 point. The 0.93 -0.95 ish range is fairly pivotal. I wasn't surprised about a reaction at this point, and as of last night, it was a fairly strong reaction. If it stays above 0.94 then it will trickle higher, if it falls below, its headed south.

 

[markis10]

I'm going to spin a slightly different view on this, some of you will appreciate, some of you will dismiss it.

From a technical chartist point of view.

Just 1 point. The 0.93 -0.95 ish range is fairly pivotal. I wasn't surprised about a reaction at this point, and as of last night, it was a fairly strong reaction. If it stays above 0.94 then it will trickle higher, if it falls below, its headed south.
View attachment 16448

Sounds like a bit of a bet each way, the inference being if it does slide it will be quick

 

[drsmithy]

Agree about vision, some people think its about "picking winners" like the NBN or windfarms, but governments have a proven ability to pick the noisiest losers - like car manufacturing. Would be good if a political party was honest enough to say that "we cannot pick winners, we will provide the following necessary services and collect the following taxes to fund these services and then get out of the way and leave it to market economics as to where economic growth comes from."

Some of us consider telecommunications infrastructure to be one of those "necessary services", and that Howard's sale of Telstra [infrastructure] was one of the largest of a whole litany of poor policy choices.

 

[whatmeworry]

What exports other than minerals and food. we just don't make anything any more. We don't even turn our minerals in metals. still think .85 to .88 is about right....

There are some samll Biotech companies but the big one is CSL.

The markets are pricing in a coalition victory and a switch to austerity?

So the Coalition want a recession?

 

[Craigie]

Sounds like a bit of a bet each way, the inference being if it does slide it will be quick

it sounds like that! But I wouldn't be willing to buy it at the moment. I have a feeling we will break down BUT only IMHO!!

If you notice in my chart above the 3 candles where the AUD fell sharply down to the .95-.96 zone and then recovered but each time didn't recover as well as the last time. Gives me reason to think it wants to go down and not up.

 

[cove]

We shandied in a purchase last night at .9650 so our bank of currency remains over 1.02 that is unused.