Australian dollar still a concern for manufacturers

The manufacturing, tourism and education sectors will be hit the hardest by the skyrocketing Australian dollar, with some manufacturing companies worried that stiffer import competition and decreased margins will be the death of them.

The Australian dollar reached a 30-year high on Wednesday at US$110.40, and has fallen only marginally today to US$109.90.

Australia’s industry spokesperson, Australian Industry Group chief executive Heather Ridout, warns the high dollar carries ‘substantial risks’ for manufacturers. 

"Trade exposed industries, whether export oriented or import competing, are taking a competitive hit while seeing limited benefits arising from the big investments in our minerals sector. No one can know with any certainty the impact on the Australian economy if the dollar stays at above parity, let alone at levels around $US1.10, for a protracted period of time,” she said.

"Industries which will be most affected include manufacturing, tourism and education which were the drivers of the miracle economy of the nineties and are some of the biggest employing sectors in Australia.   

"The current imbalances in the economy carry substantial risks. These require a measured, but active and far-sighted response from Government to lift productivity and to ensure the economy has a diversified base on which medium and longer-term prosperity can be built.”

One manufacturer from the building materials industry said the exchange rate could lead to rationalisation in the sector.

"We’re not in the business of predicting what the currency will do, but it is a concern when it’s as high as it is that the floor of what we can expect (as an exchange rate) is higher and so we have to be mindful of running our operations on that basis," the manufacturer told The Australian newspaper.

"We constantly look at our cost base and margins but this obviously is a major factor when we decide whether to rationalise (our plants) further."

 

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