By Mehroz Siraj
MELBOURNE: The high Australian dollar is causing substantial damage to the Australian economy and its global competitiveness, experts have said.
Experts from the Victorian Farmers Federation (VFF), the Victoria Tourism Industry Council (VTIC) and the Australian Industry Group (AIG) gave this frank assessment, on ABC Radio on Friday May 04.
The Australian dollar had fluctuated between $1.01 to $1.06 versus the United States dollar over the last ten months, they said.
The main reason for this, according to them, was the overall better economic conditions in Australia when compared to the United States and European economies.
Julie Toth, the chief economist of the AIG, informed that the high Australian dollar had a very negative impact on the country’s manufacturing industry which shed approximately 130,000 jobs over the last few years.
She said that the high dollar was here to stay for the foreseeable future.
Industries would have to be more innovative in their approach towards producing value added goods and services, she argued.
In response to a question about the decline of the car manufacturing industry, she said that the automobile industry was struggling because the high Australian dollar.
According to her, this meant that the import of spare parts and components was becoming more expensive, whereas imported cars were becoming more inexpensive.
However, she said that the lack of innovation and research and development were also important factors contributing to the industry’s decline.
She said that local car manufacturers should invest more into researching the needs and demands of the consumers, something that they had failed to do for some time.
Commenting about the impact of the high dollar on the tourism industry, Dianne Smith of the VTIC said that Australia was now becoming a high cost destination for foreign tourists.
“Its a double-whammy effect,” she said, arguing that the high dollar meant that more Australians were travelling overseas for holidays whereas foreign tourists were not coming to the country in large numbers.
“Australia is a high cost destination, that is the new norm,” she said.
“We need to innovate our products so that people feel there is value for money,” she argued.
Australian tourism businesses should prepare new and innovative marketing strategies that promote the country’s uniqueness and hospitality to an international audience, she said.
According to Dianne, because of the high Australian dollar, annually, about 8 million Australians were travelling overseas for holidays and a similar number of foreign visitors were not coming to Australia.
The rise in overseas travel and online shopping meant that more Australians found it cheaper to buy things from overseas, rather than buying Australian made products, argued Dianne and Julie.
The growth in online shopping and overseas buying was creating problems for retailers in the country, they said.
Peter Tuohy of the VFF remarked that the high dollar had made Australia’s agricultural products less attractive for foreign buyers.
“The impact has been great particularly on agriculture and horticulture because of the uncompetitive nature of our product,” he said.
He said that imported fruits and packaged food was much cheaper as compared to locally grown varieties.
Talking further, he said that because of the high dollar, Australian liquor and wine were becoming more expensive in the international markets.
He further added that due to the high dollar, the growing of fruits and vegetables in Australia was becoming a more expensive business.
Because of these high costs, many farmers were now out of business, he said.
Julie, Dianne and Tuohy said that tax reforms were the key towards providing support to the struggling sections of the economy.
“Tax reforms are the key towards mitigating the impact of the high dollar,” Dianne said.
New taxes on the tourism industry will further inflate business costs for the industry, Dianne remarked.
However, she also said that tourism and other industries of the economy needed to continue creating new brands and providing value added services for their customers.
Tax reforms should be complimented by strong investments in innovation, and infrastructure development, experts said.
Investments in these areas would enable Australia to attract more foreigners every year and will also make Australian businesses more competitive, they said.
They also stressed upon the need for having a stable fiscal and monetary policy so that inflation and interest rates could be stabilized.
This would ensure that the high value of the Australian dollar will not artificially inflate further in the coming years, they said.
A stable value of the Australian dollar would still enable businesses to plan and invest in the future with confidence and hope, they said.