Importers squeezed as Australian dollar falls

15th April 2015

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Bad news in the global economy continues to have a negative impact on the strength of the Australian dollar. As at April 15, the Australian dollar was trading at 0.7599 US dollars, experiencing a small boost from weak US economic data released recently.

However, this slight bump upwards is nothing when compared to where the Australian dollar was this time last year. In April 2014, one Australian dollar could buy 0.9424 US dollars, representing a 17 per cent decrease in value.

The US is not the only one of Australia's trading partners where the dollar's value has decreased in recent months. New Zealand is now on the verge of having its currency valued at parity with their trans-Tasman neighbour. 

Trade with New Zealand is unlikely to be much affected and may even increase slightly with greater consumer confidence in that country, according to an ANZ-Roy Morgan survey. However, as many Australian and New Zealand goods are made in China - and bought with US dollars - trans-Tasman currency rivalries plays second fiddle to what is happening in the much larger economies in the world.

On that note, poor economic data released about the Chinese economy on April 15 has caused the Australian dollar to fall to its lowest level against China's currency, the renminbi. Whether trading in US dollars or in renminbi, imports from China are likely to be more expensive in the future. 

While analysts believe the level of imports will not be impacted, efforts to diversify what Australia trades with China are steadily becoming more expensive for Australian and Chinese firms.

For importers, a weaker Australian dollar means the cost of doing business with companies overseas has just gotten more expensive. Add to this a host of other tough domestic economic statistics, and businesses are in for a potentially difficult year.

Australian importers may need to get smarter about the way they do business, Having a high quality accounting software with speciality importing cost functions can go a long way in improving business in tough economic times.