As part of a new WeekAhead section the Canberra Times will present a profile a likely "newsmaker" each Monday.
I got to do the first one. A profile of the remarkable Aussie Dollar. Busting through 96 US cents and heading north.
I took a decidedly positive view of the move. As I see it, increased buying power has to be a good thing. Was I right?
The Aussie speaks:
MOST of the time I work behind the scenes. Everyone’s complaining about high petrol prices right now, but has it occurred to them that if it wasn’t for me, quietly climbing from 77 US cents at the start of last year to 96 US cents today; petrol would be really expensive – around $2.00 a litre rather than $1.60 by my reckoning.
Of course that’s not really fair of me. I couldn’t have stayed still while the price of oil was climbing. Every time the price of oil climbs the dealers who buy and sell me push up my price. They figure if the price of oil is going up so too will the price of other fuels such as gas, coal and uranium which Australia produces in abundance. The more Australia’s customers pay for those resources the more they’ll need Australian dollars and so the more they will pay for those dollars. Or that’s what the dealers think...
It’s funny being a currency. You would think my price would be set by the foreigners who buy me in order to invest in Australia, buy Australian exports or visit Australia and the Australians who sell me for foreign currencies in order to invest overseas, buy imports or visit other countries.
But in fact my price is set by the dealers who speculate about what is likely to happen to my price. It’s a bit like being on Big Brother. Everyone’s watching and placing bets on what’s going to happen to me.
So when there’s news about what might happen to me in the future my price moves quickly. Last week it was an indication that the Reserve Bank has been actively considering pushing up Australian interest rates. Kapow! I shot from 95.5 US cents to well above 96 US cents like that. The traders see no reason to wait until foreign money pours into Australia to take advantage of higher interest rates. They push up my price4 straight away.
Life’s good for me at the moment, and good for the Australians who rely on me. Almost everything that’s imported is cheaper than it was or cheaper than it would have been had my price not soared – including petrol.
It didn’t used to be like that. September 2001 marked a low point. With no talk of a resources boom, and with the US dollar riding high I sank below 50 US cents. That’s right. I was a two-for-one special. Americans who wanted to come here could get two of me for one of there’s. I was humiliating. I could only buy half of a greenback.
But since then the US has run into strife and I’ve become what people buy if they think world commodity prices are going to keep climbing – which people do.
Soon I’m likely to worth one US dollar and if people keep thinking commodity prices will climb there’s no reason why I won’t climb beyond US$1.00. Westpac is tipping US$1.02 by March.
Even against the basket of the currencies that I am swapped for (the so-called Reserve Bank Trade Weighted Index) I am headed for a post-float high. I am getting close to 100 Japanese Yen and 50 British pence. I remember when I used to buy only one third of a British pound.
My Australian detractors say that I am getting too high for our exporters to be competitive. But they sure look competitive to me.
Contract prices for coking coal are set to climb by more than 200 per cent in the year ahead. Thermal coal prices are set to climb 125 per cent, iron ore prices by at least 65 per cent.
Food prices are also soaring, which is good for our farmers - where they can get the water.
Our manufacturers will find it even more difficult, but even for them any inputs they buy from overseas will be cheaper than they would have been.
Overall I am happy being high. I can help spread Australia’s new wealth. Shoppers in Sydney, Melbourne and Canberra are getting more for their dollar when they buy imported shoes, clothes and electronics goods because iron ore miners in Western Australia are getting a better price.
It won’t last forever but (just between you and me) I can’t see it stopping.