"There is no single magic AUD value that is perfect for all Australian businesses, but at 80 US cents or less, close to 90% of Australian manufacturers say they can compete in export markets and 70% say they are competitive against imports.
"Exporters will take some comfort from the fact that while the AUD has risen sharply against the US dollar – up close to 10% this year – there has been a more modest movement in the Trade Weighted Index (TWI), which sits at around 67 points (rise of less than 5% this year). The AUD has also not risen as sharply against other major currencies – for example, the Yen, Euro and Pound.
"Ai Group's Australian Performance of Manufacturing Index (Australian PMI®) indicates that over the longer term, a TWI value of around 70 points or less is conducive to recovery and growth in manufactured goods exports. It's hoped that the dollar will not continue its rise and put at risk the momentum that has been growing for the past year in the manufacturing sector in particular.
"That said, for every business that wants a lower dollar to assist their exports, another will benefit from a higher dollar which reduces the costs of imported inputs including equipment for investment. In many cases, exporters are also importers, and so a stronger Australian dollar can genuinely be a double-edged sword.
"Clearly, all growth segments across manufacturing and services exports rely on more than just the AUD for their competitive advantage. But even so, a higher AUD remains an ever-present risk to their recovery and outlook.
"The higher dollar also adds unavoidable costs to many businesses at a time when rising energy costs are cutting deeply into margins. Governments need to redouble their efforts to agree on policies that will put downward pressure on energy costs that are eye-wateringly high to help mitigate to dollar cost impact," Mr Willox said.
Media enquiries: Tony Melville – 0419 190 347