Low dollar will hurt businesses: Economist

Low dollar will hurt businesses: Economist

08 July 2013 by Staff Reporter 0 comments

Stacey Moseley

The lower Australian dollar will hurt small business, one senior economist has said. But it could signal increased activity from overseas buyers, especially the Chinese.

Australian Property Monitors senior economist Andrew Wilson is concerned with reports that the Australian dollar is on track to drop to between 70 and 80 US cents.

“I would be concerned with a 70 to 80 US cent Australian dollar, I think that would work its way into particularly higher import costs, particularly fuel,” he told Real Estate Business.

“I think if we start to get a two dollar plus a litre model in our economy that would have a significant impact on the cost base of most businesses, and I think that would be a significant barrier to economic growth.

“A lower dollar is good for our exporting industries. But it also has a downside in terms of the cost of imports, particularly for manufacturing imports that are used to create our exports.”

However, Mr Wilson has expressed uncertainty as to what the low Australian dollar will mean to overseas buyer interest.

“The low dollar means Australian property becomes cheaper to overseas buyers. However, we’ve seen the phenomena of increased activity by overseas buyers with the increase of the Australian dollar, which has signaled to a lot of buyers - especially Chinese buyers - that the Australian economy is strong. So perhaps a lower dollar may show the opposite signal?” he said.

According to Andrew Taylor, co-founder of Juwai limited and owner of juwai.com, a Chinese translated international listing portal, the change in global FX rates has had an impact on the affordability and desirability of Chinese buyers for Australian property.

“We have noticed continued growth in searches for Australian property on Juwai over the past few months, coupled with increased leads and consumers planning to visit Australia,” Mr Taylor told Real Estate Business.

According to Mr Taylor, between April and July there has been a 10.5 per cent increase in purchasing power of the US dollar over the Australian dollar. In the same period, the RMB (China) has grown stronger against the US dollar. The direct effect is that the RMB is now 13 per cent stronger against the Aussie dollar.

“…This means that property in Australia, purchase price plus transactional costs, is essentially 13 per cent cheaper,” he explained.

“Within south east Asia, cooling measures by Hong Kong, Singapore and a few others are having an effect on the desirability and affordability of property in these countries by Chinese Buyers.

“We anticipate that as south east Asian markets continue to cool, and as favourable currency exchange rates maintain their current levels, there will be continued greater interest in Australian and New Zealand property by Chinese buyers,” Mr Taylor continued.

“We are even starting to notice interest in Australian property by Chinese buyers from Hong Kong, Singapore and Malaysia.”

Stacey Moseley

The lower Australian dollar will hurt small business, one senior economist has said. But it could signal increased activity from overseas buyers, especially the Chinese.

Australian Property Monitors senior economist Andrew Wilson is concerned with reports that the Australian dollar is on track to drop to between 70 and 80 US cents.

“I would be concerned with a 70 to 80 US cent Australian dollar, I think that would work its way into particularly higher import costs, particularly fuel,” he told Real Estate Business.

“I think if we start to get a two dollar plus a litre model in our economy that would have a significant impact on the cost base of most businesses, and I think that would be a significant barrier to economic growth.

“A lower dollar is good for our exporting industries. But it also has a downside in terms of the cost of imports, particularly for manufacturing imports that are used to create our exports.”

However, Mr Wilson has expressed uncertainty as to what the low Australian dollar will mean to overseas buyer interest.

“The low dollar means Australian property becomes cheaper to overseas buyers. However, we’ve seen the phenomena of increased activity by overseas buyers with the increase of the Australian dollar, which has signaled to a lot of buyers - especially Chinese buyers - that the Australian economy is strong. So perhaps a lower dollar may show the opposite signal?” he said.

According to Andrew Taylor, co-founder of Juwai limited and owner of juwai.com, a Chinese translated international listing portal, the change in global FX rates has had an impact on the affordability and desirability of Chinese buyers for Australian property.

“We have noticed continued growth in searches for Australian property on Juwai over the past few months, coupled with increased leads and consumers planning to visit Australia,” Mr Taylor told Real Estate Business.

According to Mr Taylor, between April and July there has been a 10.5 per cent increase in purchasing power of the US dollar over the Australian dollar. In the same period, the RMB (China) has grown stronger against the US dollar. The direct effect is that the RMB is now 13 per cent stronger against the Aussie dollar.

“…This means that property in Australia, purchase price plus transactional costs, is essentially 13 per cent cheaper,” he explained.

“Within south east Asia, cooling measures by Hong Kong, Singapore and a few others are having an effect on the desirability and affordability of property in these countries by Chinese Buyers.

“We anticipate that as south east Asian markets continue to cool, and as favourable currency exchange rates maintain their current levels, there will be continued greater interest in Australian and New Zealand property by Chinese buyers,” Mr Taylor continued.

“We are even starting to notice interest in Australian property by Chinese buyers from Hong Kong, Singapore and Malaysia.”

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