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Strong Aussie dollar continues to hurt exporters

Media release

CommBank can

Media release

Strong Aussie dollar continues to hurt exporters

12th June 2012: Despite its weaker performance in recent weeks, the high Aussie dollar is having a marked and sustained impact on exporters, with over three-quarters (80 per cent) revealing they struggle to remain competitive when the dollar rises above $US 0.91, according to the latest Commonwealth Bank Aussie Dollar Barometer. 

The Aussie Dollar Barometer tracks importers’ and exporters’ exposure to the Australian dollar, their expectations for trading levels, and hedging plans for managing foreign exchange risk.

Exporters believe the Aussie dollar, which has been over $US 0.91 since September 2010, has the biggest impact on business when it pushes between the $US 0.91 - $US 1.00 range. Unsurprisingly, this is in stark contrast to importers, with 23 per cent suggesting they would become uncompetitive if the dollar dipped to the post-float average level of $US 0.74.

In the face of this continued pressure, the Aussie Dollar Barometer has also revealed the high Australian dollar is a catalyst for raising productivity for 83 per cent of businesses. A higher proportion of exporters (89 per cent) say they are working to increase productivity, to offset a reduction in competitiveness in global markets. Exporters are, however, not alone in this area, with the majority of importers also increasing the focus placed on productivity (83 per cent).

According to Joseph Capurso, Currency Strategist, Commonwealth Bank, it was vital that organisations continued to focus on restructuring business operations and enhancing productivity levels in order to survive.

“It’s been a tough two years for exporters and the high dollar is making it very difficult for them to compete in global markets,” said Mr Capurso.

“The reality is that despite a predicted easing of the Aussie dollar, there will not be enough of a fall in the dollar for exporters to feel significant relief. The key, therefore, is for these firms to make the necessary structural changes to lift productivity, something that the Reserve Bank has also taken into account in its low inflation forecasts and decision to lower the official cash rate.”

The Barometer reveals most businesses expect the Australian dollar to depreciate over the next year. Businesses with an annual turnover of $500 million or more are most bullish, anticipating the $A to be at US $1.04 by the end of September, with other businesses expecting the $A to soften just under parity in 2012. Importers remain more optimistic about the strength of the $A, with the average importer expecting the $A to be at $US 1.02 by the end of June, compared to exporters who expect it to dip below parity at $US 0.99.

More businesses will also look to protect themselves against foreign currency exposure moving forward, with almost three-quarters (70 per cent) of importers and over half (56 per cent) of exporters planning to hedge their $US exposure over the next three months.

Businesses that both import and export remain the most willing to hedge their $US exposure, with 79 per cent of businesses intending to do so.

“More businesses are beginning to adopt proactive strategies to mitigate their risk to foreign currency exposure,” said Mr Capurso.

“Over the past two years there has been a significant increase in the number of importers looking at hedging options, with over 70 per cent of businesses now employing this strategy. However, Aussie businesses are still trailing behind their New Zealand counterparts in taking this proactive approach, with 75 per cent of businesses based there planning to hedge,” stated Mr Capurso.

-ENDS-

For further information please contact:

Kate Dudman 
Associate Public Relations Advisor
Commonwealth Bank
P: (02) 9118 7370
E: kate.dudman@cba.com.au

About the Aussie Dollar Barometer:
The Commonwealth Bank Aussie Dollar Barometer is prepared every three months based on a survey conducted by East & Partners.  East & Partners is a market research and advisory firm. For the May 2012 edition of the Commonwealth Bank Aussie Dollar Barometer, East & Partners interviewed almost 900 businesses turning over at least $A 5 million per year.  The interviews took place between 15-18 May.  The average value of the $A during the survey period was $US0.99.  Businesses were asked a range of questions about their exposure to and views about the $US.

Media contact:

Kate Dudman
(02) 9118 7370