Economy

Soaring dollar puts hedging on centre stage… Uploading adds to online cost… Coonan replies to OECD… Banks battle for market share… Mobiles make you more productive… Idle workers could suffer

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Soaring dollar highlights hedging importance

A lack of awareness about currency hedging has forced many SME exporters to take a hit to their margins as the value of the Australian dollar has skyrocketed, industry experts say.

The Australian dollar has reached record highs against the US dollar and the Japanese yen in 2007, making Australian products exported to those countries relatively more expensive. For SMEs in competitive industries without some protection from currency movements, this means slashing profit margins to keep prices down.

The alternative is to buy a currency hedging product. Hedging effectively provides a business with insurance against movements in currency by allowing them to buy a contract from a financial institution that guarantees Australia dollars (or any currency) at a specified price for a certain amount of time.

“I think there is a great deal of ignorance out there about what is available to exporters, especially to SMEs, when it comes to currency risk management products,” Australian Institute of Export executive director Ian Murray says.

Murray says that hedging has become economical for SMEs as both bank and non-bank institutions have started offering products designed for smaller businesses. “SME exporter’s don’t know enough about the different methods of managing forex, but there are a lot of options out there, and the crucial thing is just to seek out advice and shop around to get the best deal.”

And, he says, the horse has not already bolted for SMEs, despite the recent surge in the Australian dollar past the US87c mark. “People sometimes forget there are other countries and currencies out there. The Euro is becoming increasingly important, and that’s just one example.”

The lack of education about hedging in the SME community is reflected in figures from commercial exchange company Travelex, which shows that just 6% of SMEs have a hedging strategy.

Travelex Asia-Pacific chief executive of commercial foreign exchange Paul Appleby says the recent rise in Australian/US dollar exchange rates has increased awareness of hedging among exporters, but importers seem to be resting on their laurels. “It is easy to imagine the dollar will just keep going up, but of course there is always the possibility of a correction and it can be dangerous betting that won’t happen,” he says.

– Mike Preston

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Surge in uploading adds to online costs

The increasing enthusiasm of internet users for uploading information to blogs or social networking sites is leading more telecommunications companies to charge for uploading as well as downloading.

Optus is joining Telstra in measuring and charging for uploads as well as downloads in its internet usage caps, with other internet service providers likely to join them in the future The Australian reports today.

In the past, the internet was mainly used to download information – say a report, or a piece of software – to a person’s home computer. The advent of personal web pages and social networking sites that allow people to display their own pictures or videos, and the use of peer-to-peer software that works by uploading and downloading information across many linked PCs, has seen the volume of data uploaded from computers to the internet dramatically increase.

According to ISP iinet, people now upload four MB of data for every five they download, up from a ratio of one to four in 2001, The Australian reports.

IT Wire telecommunications editor Stuart Corner says while this won’t make broadband more expensive for the vast majority of businesses, in the longer term it may affect costs for business with very elaborate websites that make large documents or images available.

– Mike Preston

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Coonan’s take on OECD internet report

Communications Minister Helen Coonan says an international report widely viewed as damning the quality and cost of Australia’s internet and phone services actually constitutes a “strong report card” on telecommunications.

The Organisation for Economic Co-operation and Development comparison of telecommunications services in 26 countries found that phone services for SMEs in Australia were very expensive compared to those in most other countries, and the top speed internet provided by Australia’s “incumbent” broadband provider, Telstra, was below that in every country bar one – Slovenia.

But Coonan says the report’s findings that Australia has the third highest internet penetration in the world and sixth cheapest entry level broadband plan per megabit downloaded constitutes an “outstanding achievement”.

IT Wire telecommunications editor Stuart Corner says the OECD broadband figures aren’t very meaningful. “We may have the sixth cheapest broadband plan but we also have the fourth most expensive, it is such a huge range that not much can be drawn from it,” he says.

One aspect of the OECD report that Corner says deserves consideration is the finding that phone costs for microbusinesses and SMEs are comparatively expensive. “If you look at the baskets of phone service pricing, there is no escaping the fact that Australia does not stack up well at all,” Corner says.

– Mike Preston

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Battle of the banks

BankWest’s assault on the eastern seaboard will continue with another 10 new business centres expected to be opened in Queensland, NSW and Victoria by the end of next year, taking the number of business centres to 40.

The bank will also specialise in key areas including hospitality, aged care, pharmaceutical and independent grocery retailing. Gary Johnson, head of commercial banking at BankWest, says BankWest now has an east coast market share of 4.5% for business lending, which has nearly doubled in the last 18 months, but he concedes that NAB and the Commonwealth banks are still the market leaders.

BankWest is pitching its point of difference with highly competitive core products, choosing the right locations in new growth corridors with good off-street parking and lending against the growing concern of the business.

BankWest, part of HBOS plc, announced last week it was opening 125 retail banking branches new east coast branches, which the bank claims is the biggest banking network rollout undertaken in Australia from scratch.

– Amanda Gome

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Traditional auctioneer moves online

Australia’s oldest auction house, Lawsons, is going digital. The bricks and mortar Lawsons, which sells fine art, vintage jewellery and antiques, is spreading its wings online to also offer new jewellery, watches, fine wine and perfume. Even new plasma TVs. LawsonsOnline will compete with GraysOnline and Ebay.

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Mobiles make you happy, more connected to family and more productive

Checking what time you will be home and arranging to meet your family members are the most popular uses for mobile phones. A new study by Australian National University found that nearly three-quarters of all calls on mobile phones are to family and friends, and only 16% are work related.

We are very dependent on our mobiles (as if CrackBerry owners needed to be told) with 90% of people saying that their lives could not proceed as normal if they were suddenly without their mobile phone.

Most Australians have a phone, regardless of income, but 28% make less than one call a day. Workers said that while the device increased their workload, it also boosted their productivity.

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Idle workers could suffer harm

Employees at Sydney car parts manufacturer TriStar could suffer psychological damage if they are left without meaningful work too long, lawyers argued yesterday.

The Federal Government Workplace Ombudsman is prosecuting TriStar over allegations that it is keeping workers on despite the fact that there is nothing for them to do to avoid making redundancy payments under their current collective agreement. By keeping the workers on until the collective agreement no longer applies, the company could save around $2 million in redundancy payments.

Workplace Ombudsman lawyer Ian Neil told the Federal Court yesterday that he would call Ian Hickey, a professor of psychiatry at the University of Sydney, to testify that workers with nothing to do can suffer “psychological harm,” The Australian Financial Review reports.

The case, which is being contested by TriStar, is unlikely to be resolved until August or September this year.

– Mike Preston

 

Economy round-up

Tourist arrivals to Australia for June 2007 increased by 1.3% over May 2007, according to Australian Bureau of Statistics figures released today. Although small, the result suggests tourist numbers may be turning around after monthly decreases of 5.1% for April 2007 and 1% for May 2007.

At 1.15pm the Australian dollar is holding most of its recent gains against the US dollar to be trading at US87.33c, although that is down from the US87.60c achieved in Sydney late yesterday. At the same time, the S&P/ASX 200 has barely moved this morning, dropping just 0.4 points from its 6381.2 opening level.

– Mike Preston

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