Five years after the Australian currency was floated, its current altitude is damaging the country's exports and forcing many small businesses out of the export market.
In recent months, the Australian dollar has become the fifth most actively traded currency (in trading against the U.S. dollar) after the yen, the deutsche mark, the Swiss franc and the pound sterling.In the year through last October, the Reserve Bank of Australia spent US$7.5 billion to try to stop the upward surge of the currency.
But exporters are agitating for greater action and a more positive approach by the country's central bank or a firm statement from the government that it will not allow the Australian dollar's exchange rate to damage export industries.
Two years ago, the Australian dollar was worth 65 U.S. cents. The country's export industries were prosperous and many manufacturers invested in plant, facilities and marketing for thrusts into world markets.
The Australian dollar is now above 85 U.S. cents. Traditional export industries are suffering and manufacturers who embarked on their first export programs are retreating from an uncompetitive position.
Australia's struggling coal industry has lost most of the benefit from recent hard-earned price increases. A one-cent upward move by the Australian
dollar against the greenback costs coal producers 61 Australian cents for each ton of coal exported. About two-thirds of production is exported.
Some of the bigger coal companies, with their own currency trading departments, have managed to use the volatile exchange rate environment to their advantage. Coal & Allied Industries, for instance, earned US$4.16 million in the fiscal year ended last June, while sustaining an overall trading loss of US$2.2 million.
Australian Coal Association executive director Barry Ritchie said the strong Australian currency was costing the coal industry US$8 million a week. He warned that if the currency remained high, marginal mines would have to close, placing thousands of jobs in jeopardy.
The strength against the greenback is causing serious problems for the estimated 70 percent of industries, which have their exports denominated in U.S. dollars.
Only about 50 percent of wool exports are denominated in U.S. dollars. But a one-cent upward move by the Australian dollar against the greenback robs producers of around US$25 million on an annual export basis.
The Cattle Council of Australia has estimated beef export returns for 1988 will be down US$400 million because of the exchange rate.