Exporters are being severely impacted by the high value of the Australian dollar, with those operating in Europe and the United States the most severely affected, industry experts say.
But the value of the dollar pales in comparison to domestic problems including unemployment, high interest rates and the issues surrounding moving to the new Fair Work industrial relations system, one expert argues.
Ian Murray, executive director of the Australian Institute of Export, says exporters are “struggling”, and that the impact of the global financial crisis, and the previously low value of the Australian dollar, is continuing to press down on companies locked into long-term contracts.
“They are certainly hurting. I think it’s fair to say that a number of things have come together against exporters, with the global financial crisis particularly impacting a number of those. The effect on Asian markets might be limited, but the dollar has had an effect not just with the US dollar, but the Euro as well.”
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Currently the Australian dollar buys US92c and EU69c, up from US89c and EU62c at the start of 2010.
But while Murray says many exporters are glad the dollar has remained steady for some time, allowing them to lock in a larger number of long-term contracts, a majority are still suffering and would prefer an exchange rate around US75c.
Additionally, he says the Government’s Export Market Development Grant scheme, which helps SMEs in the exporting industry, is severely underfunded and needs critical attention in next month’s budget.
“We’re facing a situation where the EMDG is falling short. The total amount of $200 million is not going to be sufficient for the payments ended in the year 2009, and that total drops back after the current year.”
“This is an issue the Government really needs to address. It’s a big issue, a larger issue than the dollar in many ways, because beginning SMEs are really dependent on these grants and they aren’t being delivered.”
Lynda Slavinskis, a consultant to exporters and principal of Lynda Slavinskis Lawyers & Consultants, says the dollar is hurting exporters but many are more worried about domestic economic conditions than exchange rates.
“What’s making things tough are issues like employment, regulation, Fair Work laws, that sort of thing. In terms of local business, the ability to deal with manufacturers is a big issue and many are struggling because of that.”
“In terms of the dollar, exporters are sort of cruising at the moment, or at least my clients are, and they are doing the same as they always have. The issue is that they understand the dollar will fluctuate, much like a home owner knows interest rates will rise. They build that into their budget and go with it, it’s not as confusing a variable as some other economic issues.”