If it got to 1.70 the unemployment due to close down of retailers, wholesalers and manufacturers here would be epic. At that point we would finally truly be nothing more than a quarry. And of course Gillard would still be trying to figure out how to introduce an atmosphere tax and where to put boat people.
I don't necessarily agree Jonesy. If the Aussie dollar its $1.70 U.S. you would have to look at how it is compared to other currencies, i.e. the Euro, the Yen, Asian currencies, etc. If every other major currency goes up against the U.S. dollar as well then sectors like tourism, education, etc will still survive. Also in the long run even items shipped from the U.S. would rise in price in U.S. dollars, because if the U.S. dollar weakens substantially against other currencies particularly the Yuan, as the items online retailers in the U.S. sell to Australia are often manufactured overseas in China and other countries. Basically if it is mostly Aussie dollar strength that takes the Aussie dollar to $1.70 U.S. your right, if its more about U.S. dollar weakness then I'm not sure I agree with you.
There was an article in the SMH today about tourism in Australia dying over the past 10 years. Our horrible airports and terrible marketing as well as high AUD is contributing a lot to this. Education; maybe. We are already seeing a decline in Asians moving over here to study because of the prohibitively high AUD. I would imagine at 1.7 nobody would bother coming here when you can go to US for cheap.
Retailers and Wholesalers would be fine - they'd just be buying alot more overseas crap.......RIP manufacturing though
If it gets to the point where the AUD is worth USD$1.70, there are other third world countries I'd rather visit than the United States.
The challenge in all this going ahead is capital utilisation. A strong AUD in a world of falling currencies is going to see significant capital inflow. If we can manage that well, investing it into production rather than speculation, it will set us up for the next 20 years. The concept that a cheap dollar is good is shortsighted. A stable dollar is what is needed. Let the reserve bank keep AUD1400 +-2% = 1oz, and things will be looking up.
The only way Australia is going to see $1.70 US along with similar strength against other currencies is if Australia pulls it's finger out and starts diversifying its industry. We can't continue to rely on the resources sector for continuing growth and hope it lasts for ever! Right now we have ALL of our eggs in one basket = Commodities. Yet here we have a Gov't that is crowing from the rooftops about how we have to do something about CO2 emissions. While I am vehemently opposed to a carbon tax in ANY form and right now sit in the "CO2 is an inert harmless gas camp" with good reason, WHAT IS THE GOVERNMENT DOING TO ENCOURAGE THE RENEWABLE ENERGY REVOLUTION TO START HERE IN AUSTRALIA???? This is just one of my little current bug bears about government economic policy but here is just one solution. Turn Australia into a TAX HAVEN for renewable energy companies. Allow them to apply for a special tax status that: 1. Allows companies that fit the criteria to be able to recoup ALL of their pre-breakthrough costs-tax free until they have recouped their initial investment. 2. Once recouped all costs, give them a 15% company profits tax instead of the 28-30% all other companies get. 3. Give all individual Australian investors a tax break on profits made investing in these companies so that the billions in capitol is available. These companies aren't here now so the government will take nothing from the breakthroughs they make, giving them the right conditions will allow them to set up shop here is only going to spur Australian jobs that aren't here to start with and the 15% on the back end plus GST plus payroll taxes will see us looking pretty into the future. Don't get me wrong, I love our resources sector, it's allowing me to become a stacker but this country needs more than the big miners in the long run. Sorry for the rant. Cheers Chris
And I assume silver is within those commodities? A simultaneous AUD and Ag correction should make for one hell of a dip and buying opportunity if sold at the right time or am I way out here. TIA
Interesting, if silver bounces back in the short term and then drops, we mightn't see a return to the 20's if the AUD rolls over. Wrote this a few minutes ago, think the sentiment has been covered by hobo
I must admit that I believe we will see large a correction in the A$/US$ this year also. I am not sure of when, however August - October is my pick.