Importers are having a field day with the Australian dollar above parity, with more than 55% saying the high currency has increased their appetite for borrowing money, according to the latest research from the Commonwealth Bank.
However, exporters are still feeling the pain with 41% saying the dollar has decreased their intentions to borrow.
“I think this is a story that doesn’t get told enough,” Commonwealth Bank currency strategist Joseph Capurso told SmartCompany this morning. “We hear about the downside, but there’s an upside as well.”
Importers have been riding high for a while, and Capurso says that’s set to continue with the dollar to remain higher over the next five years.
“Before the commodity boom the average was round 70 cents to the Australian dollar. Now, it’s risen into the 80s, and that’s just averages.”
“In the last year it’s sat comfortably above parity and we think over the next five years it will remain high.”
Importers have been particularly bullish in the financial sector, with 68% indicating an increase in borrowing intentions.
But many small businesses are still feeling a significant amount of pain, with 41% of exporters indicating a decrease in borrowing intentions. And smaller businesses are feeling more wary than most, with 25% of SMEs with turnover of between $5-25 million indicating they are less likely to take on debt.
Capurso says businesses are now getting used to the fact they’ll have to deal with higher prices for some time, requiring permanent changes in business models.
“Outside the resources industry, it’s going to be tough and they’re going to change their business models.”
“You can attach yourself to the mining boom in order to insulate yourself, but lifting productivity to keep profit margins up is now going to be a constant requirement.”
Bigger businesses seem to be handling the higher dollar much better, with 68% of businesses with annual turnover of between $25-150 million indicating they will hedge, compared to only 40% in July.
“Big business has a bigger appetite, and that reflects the more options they have available to them. You can establish offshore operations, for example. That’s just harder for small business.”
Exporters have been complaining for quite some time, particularly over the lack of funding in the Govenrment’s Export Market Development Grant scheme. Several businesses have collapsed, and many continue to fall into insolvency.
Capurso says these businesses have to get used to the new way of doing business – where importers are making the most money.
“We’ve got different impacts on different areas of the market here. And everyone is adjusting their expectations for how the market will pan out ahead.”