A Low Aussie Dollar: Stay Home, But Sell Overseas

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bigstock-137718839The Australian dollar is currently hovering in the mid seventies against the US dollar, meaning you get around seventy-five US cents for one Australian dollar. While a weak dollar isn’t ideal, it doesn’t necessarily mean doom-and-gloom for everyone in Australia, so let’s consider how this could impact your business, as well as what it means for you personally.

When the dollar is weak against foreign currencies, it means that imported goods will cost more. Why? Because the sellers will still want the same amount of their currency when selling to Australian businesses, but that amount in foreign currency will now require more Australian dollars to be exchanged to reach that amount.

For example, if the Australian and US dollars were equal ($1 for $1) then a pair of shoes that cost $US100 would also cost $AUD100, but if our dollar was only worth 50 cents, then those $US100 shoes would now cost $AUD200.

The flip side is that a weak dollar is better for Australian exporters, because overseas buyers can by more of our exports for less of their dollars (or pounds, euros, yen, or whatever their currency is).

If your business is entirely domestic, then in theory, a weak dollar should have absolutely no impact on your business because the dollar is only weak against other currencies, in particular the US dollar. But is it possible to have an entirely domestic business? Imagine you have a car cleaning business. You provide a service to a local customer and their payment doesn’t need to be exchanged into Australian dollars. However, where do your cleaning products come from? If they are made overseas, you may find yourself spending more on those products to do the same amount of cleaning. While the impact in this case might be negligible, it does highlight the fact that the strength of our dollar has a far-reaching impact across the whole economy, not just for those directly involved in importing and exporting.

Who else suffers from a weak dollar? Any Australian who plans overseas travel will be worse-off, because their Aussie dollars won’t stretch as far when they are spending overseas!

So, while the Australian dollar continues to struggle against the US greenback, the best option – if it’s available to you – is to stay at home, but sell your products overseas.

By Jennifer Lowe

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