number_6

But AUD bonds trading goes back over 40 years (and has been equally profitable). And affected by the same factors. Of course history is interesting only in terms of isolating the causative factors and then applying this analysis to the current and future situation. Leading indicators are like gold.

im-headed-west

29 year high this week ... brutal for US travelers

number_6

No -- brutal is when it is worth 80% more; as the USD was in Australia not so many years ago. Now it is just more or less same pricing as US travel in NYC or Boston for example, hardly brutal. Now you know how Aussies felt coming to LA for the past decade

bensyd

I don't buy that argument (which several people have made), simply because purchasing power parity is not 1:1 for USD/AUD. If you take the long run average fx rate then at the current level American tourists would be feeling the same sort of pinch that Australian tourits were back when the rate was below 50c. 3:1 on the AUDGBP rate stung too. $15 beers anyone?

number_6

Sure, US prices for touristy things like attending football games are far higher, about 1000% of the Australian price I'm sure that is what you meant by not being 1:1 (most sporting events in US will cost 3x to 10x the equivalent Australian price). And if you want to climb the Brooklyn bridge, that will cost a million

bensyd

I prefer the Big Mac index. You can't climb bridges or go to sporting events if you haven't eaten.

http://www.oanda.com/currency/big-mac-index

im-headed-west

Australia is an expensive place to travel to without the high exchange rate. At .8-.9 USD per AUD it was still expensive but not quite priced like an "exclusive" destination.

But with an exchange rate of 1.0+ combined with the "remote tax" of much of Australia it's getting pretty expensive ... to me atleast.

Big Mac index ...Australia about 20% more expensive for USD holders than NZ seems about right. No stinging trees in NZ either.

CPMaverick

Can't comment on NYC or Boston, but having just returned from Melbourne to LA, Melbourne is nowhere close to parity. My experience is about 30% higher than LA, and if you know where to go for the best values in both cities, probably 40% higher. Cheap drinks in LA are far, far cheaper than cheap drinks in MEL. At high end spots in both cities, the prices are closer but still cheaper in LA.

Australian prices are indeed 'brutal' for the average American. The well-to-do from NYC or LA won't likely mind, but I am certain that Australia is going to lose tourism over this consistent jump in exchange rate. Australia is a terrific destination and I do believe it was a bargain for many years. At 85-90 cents it was still a place that could easily be justified to the average US visitor. But at 103 cents, there are just so many destinations that offer greater value at the moment.

SFSC

A steep fall in the AUD can be anticipated anytime soon. My wife and I are travelling out of Australia over the next two months. It seems every time we go away there is a flight from the Aussie.

It couldn't be our spending that causes it, could it?

serfty

I'm not so sure the 'big mac' index is relevent to Oz other than indicating how relatively expensive Fast Food is there - relevant to other goods.

The mark up rather large.

A bit like the cost of Books really ...

... that i,s Australians are 'conditioned' to paying over the odds for books and fast foods.

bensyd

Australians are willing to pay more for most things, usually because they don't know any better. Our grocery market is worth about $75 bln/year, in the US, which has a population 15x larger, the figure is $550bln/year.

Then there is cars, houses, internet....the list goes on.

number_6

US has very different subsidy and pricing system than most other countries -- even Canada and Mexico are dramatically different. US has very low taxes on alcohol, making bar drinks cheap by world standards, and has farmer subsidies that allow many foods to be sold at retail for below the cost of production. Also in Australia all taxes are included in the listed price in stores, while in US up to 5 separate taxes are added to the bill upon checkout (varies by location). Similarly for hotel rooms the Australian price includes all fees and taxes (by law), while in the US up to 30% extra is added to that "lower" hotel price. Sydney and lately Melbourne are priced comparably to NYC and Boston and Washington DC and Miami, admittedly more expensive than cities with a glut of hotel rooms and restaurants, such as LA. But smaller towns in Australia such as Daylesford are priced similarly to US equivalents (Carmel in that example), even with the current exchange rate. Do a fair comparison and see for yourself.

CPMaverick

I did a fair comparison; I spent 3 weeks driving up the east coast and stopping at lots of small towns.

It is NOT comparable (at the current exchange rate) to small towns in the US. Not the ones I visit here anyway. 20% higher at a minimum for food, drink, hotel.

Everywhere is a bit different.. maybe you can share your data points? Where have you stayed recently vs where in the US? Maybe the west coast US is pricier than here in the midwest.

It is a very fair point that prices in the US don't include tax or tip. It makes Australian menus look much more expensive than they comparatively are, when the US menu prices are 25% lower than you'll probably spend.

number_6

Sure, midwest is much cheaper (so is Florida, the Carolinas, etc.). Most foreign tourists visit NYC and California (not opinion, but statistical result) and those happen to be more expensive parts of the US for hotel and restaurants and even entertainment. Theatre ticket in Australia is comparable to Broadway prices, not higher or lower, for example I saw Jersey Boys in Sydney and it was AUD 120. This year I've been to Daylesford (small spa town and artist colony near Melbourne) and Carmel (small spa town and artist colony comparable distance from San Francisco), and the prices were surprisingly similar. Of course Carmel has always been one of the more expensive small towns in the US, while Daylesford used to cost half as much. Globalization and supply and demand at work, along with advertising. While it is true that the Australian tourist industry cannot compete on price -- in reality it never could. Bali, Thailand, Phillipines etc. would always be far cheaper, and even NZ is significantly cheaper than Australia. Tourism in Australia has to compete on product quality. Sometimes it does a great job of that and is not price sensitive (witness the Sydney Bridge Climb), and sometimes it struggles.

One thing that US tourists have to realize is the "cheap pub food" is actually well made and cost-effective food in Australia, quite different from pubs in UK, Europe or US. Pubs (called "hotels") are the Aussie equivalent of Applebee's or TGIF, only with better food and independently owned.

CPMaverick

Carmel is notoriously expensive... I don't see that as a logical comparison point. Yes, I've been there, it's nice, but it is very high end.