I am in manufacturing and am affected both ways. We buy input materials from Germany(shipped from the UK and invoiced in US Dollars) for the manufacture of machine parts.
On the other hand we compete against equivalent machine parts with Germany,India and the US.
The price and quality competition is tight and a rising AUD reduces our margins.
The end user industry of our parts, exports about 80% of it's product into Asia and the US.
This industry has been rationalised over the years through closures and construction of larger plants. It is a world leading,super efficient,techonologically state of the art industry.
This industry has prospered on the lower dollar but numerous companies in the industry are so concerned about our burgeoning dollar that they are making plans to reduce the wages bill by standing down staff.
In a unionised country like ours it may not be lower wages but is about reducing a total wage bill.
Efficiency is not the problem here. (Except efficiencies of scale. However we will always be stuck with that)
Our primary industries are highly efficient by world standards, and yet until the lower dollar, were providing insufficient returns, in the main, to make them long term viable industries (Perhaps more accurate to say most enterprises within an industry.)
Now the point I was taking up with you was your perceived link between a nation's trading strength and a strong (In this case I took it to mean historic value)currency.
I asked that you show a causal link between trade and currency. Your response was to say the AUD had been historically higher and on that basis it was and still is undervalued. That might satisfy an economist but it is not a causal relationship.
The truth is the AUD is more at the mercy of the money market than the major currencies. Further if the dynamics between the state of the economy and the AUD has changed the dollar may not behave as it has historically done.
Perhaps what I should have said is that it SHOULD be valued where our highly efficient (think of the US and European subsidies) export industries can prosper.
In that context our currency was strong enough and more likely to make our nation more properous in the long run. (High overseas debt not withstanding)
As an engineer my stock in trade is mathematics and the economists figures just don't add up. In fact they haven't done so for quite a long time in our country.
Incidently for those who believe this is only a USD weakness thing, the 12% increase in the AUD/USD has ,in the same time, been exceeded by the AUD/GBP at 14%.
