Fears that a high Australian dollar will affect manufacturing in Australia have been confirmed with yesterday’s release of the National Australia Bank’s business survey.
The survey revealed that the rising Australia dollar has affected confidence last month, despite a boost in March, with the dollar dropping to its long-term average of seven last month with the dollar reaching its highest since the float, $US1.10, last week, SMH online has reported.
According to the report, the survey’s measure of business conditions for manufacturing slumped to minus 10, the weakest reading of any sector, indicating that a growing majority of firms in the sector were doing it tough.
NAB’s head of Australian economics, Rob Brooker said manufacturers are likely to be in trouble if the dollar remains in near $US1.10.
Brooker told SMH online that there is “a bit more pain in store for the manufacturers” adding that should the Australian dollar $US1.10, opportunities for the manufacturing industry will fad away.
The survey also revealed that current weaker trading conditions could worsen if the Reserve Bank raises interest rates. The NBA suspects that the RBA could raise rates in June and September, the ABC reports.
While a high Australian dollar has been painful for trade-exposed sectors such as manufacturing, the mining industry is reportedly receiving higher prices on world markets.
The Australian dollar is trading at around nearly $US1.08 at 10 May 2011 at 11.05am according to SMH online Currencies Indictor.
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