Economy

Plummeting Australian dollar causes importer collapse – and there’s more on the way

SmartCompany /

The plummeting value of the Australian dollar against the US and Asian currencies has sent costs skyrocketing for Australian importers, putting many under severe pressure, according to one retail expert.

The plummeting value of the Australian dollar against the US and Asian currencies has sent costs skyrocketing for Australian importers, putting many under severe pressure, according to one retail expert.

Greg Keith, a director at accounting firm Grant Thornton, has just been appointed as an administrator at Aquarium Industries, Australia’s biggest importer and wholesaler of ornamental fish.

The company supplies around 60% of the Australian market, including around 1000 retailers, and has been hurt badly by the sharp fall in the Australian dollar, and the sharp drop off in consumer spending has compounded the problem.

Keith says it is a common problem among importers. “If importers haven’t organised a longer-term hedge position then their cost of sales has risen significantly.”

But even those prudent importers who did put hedging in place while the Australian dollar was hovering at US97c just five months ago face a difficult 2009, with most long-term hedging programs set to expire in February and March.

“When that hedging finishes then the costs that they’ll be paying will be huge by comparison to earlier this year,” Keith says. “If they can’t pass on those costs the businesses will suffer.”

Given Australia’s shaky retail environment and worsening economic outlook, importers will be faced with a choice – pass on higher costs and watch sales slide, or try and absorb the higher costs and watch profits fall.

Either way, Keith is expecting the shakeout among wholesalers and retailers that are reliant on imports.

Meanwhile, he is confident of finding a buyer for Aquarium Industries and saving the jobs of the company’s 60 staff. “We’ve had some interests both locally and from overseas. By way of its size it’s an attractive business.”

Keith is looking forward to January, which is traditionally a very good month for fish wholesalers and retailers, particularly as customers replace goldfish that die over the holiday period.

“It would appear January is not a great month for goldfish, but we’ll get some respite,” Keith says.

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