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CPMaverick Nov 12, 10 1:20 pm

Australian Dollar
 
Well the Aussie dollar reached parity with the USD less than 2 years after being at 68% of it!

A combination of factors, including a weak USD and a strong AUD are contributing (it's not entirely one sided). It's been hovering around the even mark since. Anyone from either side wish to comment?

I reckon it is good for the US economy but terrible for US Citizens in Australia. I think that it will end up around 0.95 or so and won't go back to previous levels anytime soon....

kiwibigdave Nov 12, 10 2:01 pm


Originally Posted by CPMaverick (Post 15128397)
Anyone from either side wish to comment?

Can certainly state the obvious; it's making it pretty darn tough for Aussie exporters, but real attractive to be buying online from the USA, or if you're thinking about a holiday / vacation there.

kenish Nov 13, 10 10:54 pm

We went to Oz in June 2009 and the AUD was about 70 cents...when I booked a lot of stuff in Feb/March 09 it was about 65 cents! Glad we went when we did.

The Aussie economy is very robust thanks to the major components being raw materials and agriculture and the wisdom to align with Asia 2 decades ago. Just as important, Aussie public sector debt is a small percentage of GDP (I believe less than 10%) while ours is north of 65% and getting worse.

Our Federal Reserve has further eased rates (they are at a 53-year low) while Reserve Bank of Australia recently raised rates...all cogs in the wheel. If any of my comments about Oz financials are off, please correct them!

I think the USD will stay weak....we shipped boatloads of greenbacks to China in trade for flimsy goods. More greenbacks were printed to bail out banks who are sitting on the cash and not too eager to circulate it back into the economy. So our consumer-driven economy will stay stagnant until something thaws. (Aviation content- the 787 is getting cheaper for Qantas as the delays continue).

bensyd Nov 14, 10 12:54 am


Originally Posted by kenish (Post 15136335)

The Aussie economy is very robust thanks to the major components being raw materials and agriculture and the wisdom to align with Asia 2 decades ago. Just as important, Aussie public sector debt is a small percentage of GDP (I believe less than 10%) while ours is north of 65% and getting worse.

Our Federal Reserve has further eased rates (they are at a 53-year low) while Reserve Bank of Australia recently raised rates...all cogs in the wheel. If any of my comments about Oz financials are off, please correct them!

Agriculture when compared to resource exports is fairly small, infact Australia is a net food importer now. Total agricultural exports are about 1/10th of resource exports.

Re Australian public debt the government went into the GFC with zero debt (there were government bonds, but these were largely to assist financial markets in pricing assets), debt is expected to peak at about 7% of GDP through the cycle.

im-headed-west Nov 14, 10 9:52 am


Originally Posted by CPMaverick (Post 15128397)
Well the Aussie dollar reached parity with the USD less than 2 years after being at 68% of it!

...

68% was an aberration ... one of the many during the recent financial meltdown.

AUD will be near parity until US inflation is imminent.

CPMaverick Nov 14, 10 4:00 pm


Originally Posted by bensyd (Post 15136673)
Agriculture when compared to resource exports is fairly small, infact Australia is a net food importer now.

Depends on your definition of 'food.' The recent reports of Australia being a net food importer are extremely misleading, and you cannot apply that to 'Agriculture' because Australia is by far a net exporter of agricultural goods.

The report that was issued and widely publicized only considered grocery products. Australia is a net importer of grocery products but exports a huge amount of unprocessed food product (wheat, sugar, etc) that was not included in those numbers.


Originally Posted by im-headed-west (Post 15138168)
68% was an aberration ... one of the many during the recent financial meltdown.

AUD will be near parity until US inflation is imminent.

It was actually 62%, which is a spike, but was in the 6X% range for many months. It stayed in the 7X% range for two years, ramping up above that for about a year before 2009.

So I don't know how you qualify an aberation, but the current state of parity is more unusual than the long-standing mid 70% range.

number_6 Nov 14, 10 4:22 pm

AUD exchange rate is actually surprisingly predictable over the past 40 years, just look back at the historical rates. Quite obvious in retrospect :) The current outlook is to get to go up another 10% in the next 6 months, so pricing will only get worse for tourists. The tourism sector is starting to hurt, but Sydney hotels are at 90%+ occupancy despite very high rates, so it will take some time before tourism costs will drop.

bensyd Nov 14, 10 4:42 pm


Originally Posted by CPMaverick (Post 15139989)
Depends on your definition of 'food.' The recent reports of Australia being a net food importer are extremely misleading, and you cannot apply that to 'Agriculture' because Australia is by far a net exporter of agricultural goods.

The report that was issued and widely publicized only considered grocery products. Australia is a net importer of grocery products but exports a huge amount of unprocessed food product (wheat, sugar, etc) that was not included in those numbers.

And that's always been Australia's problem. We sell you the wool and buy back jumpers, we sell you the iron and buy back steel, we sell you the ingredients and buy back the food. It's no wonder we usually have such an abysmal terms of trade.

number_6 Nov 14, 10 5:59 pm


Originally Posted by bensyd (Post 15140199)
And that's always been Australia's problem. We sell you the wool and buy back jumpers, we sell you the iron and buy back steel, we sell you the ingredients and buy back the food. It's no wonder we usually have such an abysmal terms of trade.

Having more resources and wealth than consumption and manufacturing capacity isn't a problem but rather a blessing. Now policy of how those resources are allocated and who benefits from them is another matter, but that is a societal division of wealth issue. Australia doesn't need to grow the pie -- it is huge already -- but does need to watch which little piggies are taking multiple slices.

One of the most efficient steel mills in the world happens to be in QLD, and now is losing money due to the change in exchange rates (most costs are in AUD and most revenue is in USD). Still a great plant, but now uneconomic. Adding value to iron ore and coal can be tricky. Of course this is when the quality of management becomes supremely important.

CPMaverick Nov 14, 10 6:11 pm


Originally Posted by number_6 (Post 15140096)
AUD exchange rate is actually surprisingly predictable over the past 40 years, just look back at the historical rates. Quite obvious in retrospect :) The current outlook is to get to go up another 10% in the next 6 months, so pricing will only get worse for tourists. The tourism sector is starting to hurt, but Sydney hotels are at 90%+ occupancy despite very high rates, so it will take some time before tourism costs will drop.

May I ask how you see it being so predictable? I see predictable activity that would make me have the opposite conclusion (that it will retract, not gain against the dollar).

However if I look at the current economic conditions I suspect it might gain on the dollar.

So that doesn't seem predictable to me. :confused:

I have bought and sold AUD the last three years and made some decent returns but now have cashed out, if you have indicators it would be interesting for me.

DownUnderFlyer Nov 14, 10 6:52 pm


Originally Posted by CPMaverick (Post 15128397)
I reckon it is good for the US economy but terrible for US Citizens in Australia.

Nothing to do with citizenship. I know many Americans here who are very happy as they are being paid in AUD. And I also know Aussis who are very unhappy as they are working for a big American credit card company and get paid in USD and they are much worse off than 12 months ago.

bensyd Nov 14, 10 8:18 pm


Originally Posted by number_6 (Post 15140610)
Having more resources and wealth than consumption and manufacturing capacity isn't a problem but rather a blessing.

A chronic CAD isn't a great thing to have, nor is the fact that we import vast amounts of capital for uneconomic purposes such as property speculation, and putting things on the credit card. If it wasn't for a once in a century mining boom we'd be in the same sinkhole as the rest of the world. Our export base is far too narrow.

CPMaverick Nov 14, 10 10:11 pm


Originally Posted by DownUnderFlyer (Post 15140946)
Nothing to do with citizenship. I know many Americans here who are very happy as they are being paid in AUD. And I also know Aussis who are very unhappy as they are working for a big American credit card company and get paid in USD and they are much worse off than 12 months ago.

You're right, I meant just visitors who use primarily US currency.

number_6 Nov 17, 10 2:32 am


Originally Posted by CPMaverick (Post 15140694)
..
I have bought and sold AUD the last three years and made some decent returns but now have cashed out, if you have indicators it would be interesting for me.

Forex trading in AUD and AUD bonds has been easy money for the last couple of decades......of course the indicators are interesting, but they are hardly free.

Lonely Flyer Nov 22, 10 2:44 pm


Originally Posted by number_6 (Post 15140096)
AUD exchange rate is actually surprisingly predictable over the past 40 years, just look back at the historical rates. Quite obvious in retrospect :) The current outlook is to get to go up another 10% in the next 6 months, so pricing will only get worse for tourists. The tourism sector is starting to hurt, but Sydney hotels are at 90%+ occupancy despite very high rates, so it will take some time before tourism costs will drop.

The Australian Dollar was floated in 1983 so the relevant period is 27 years of data.


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