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Australians Warned as Currency Dives to 6-Year Low

Australians Warned as Currency Dives to 6-Year Low
Australians Warned as Currency Dives to 6-Year Low

Australians could feel the pinch at the checkout as the falling dollar drives up the cost of importing goods such as electronics, clothes and cars, economists say.

The Australian dollar hit 75.09 US cents on Saturday, its lowest level since May 2009, on the back of the weak consumer spending and falling iron ore prices, BusinessDay.com reported.

While the Reserve Bank has been calling for a lower dollar to stimulate growth, economists say consumers could bear the brunt if higher import costs are recovered through higher retail prices.

“A whole raft of imported goods has the potential to be higher, from electrical items to cars,” Commsec chief economist Craig James said.

“The question is whether the retailers decide to pass it on. It will depend on what [profit] margins are doing at the moment; it just depends what scope a business has to cut costs.”

Tarken Ceviker, from HiTek Audio and Video, said his store had already seen the effects of a lower Australian dollar, which has been on a steady tumble since hitting parity with the US in 2011.

He said suppliers to the Northcote store jacked up wholesale and recommended retail prices on imported gear by 15 to 20% in January, driving some customers away.

While mid-range goods from big retailers only had a shelf life of about 12 months before being superseded by new and more expensive models, Ceviker said the high-end products he sold were often on the market for six to seven years, making them a good barometer of how the dollar affected consumer prices.

“Every time there’s an improvement in the Aussie dollar, the price drops, anytime the Aussie dollar drops, the price goes up.”

Commsec’s James said that while there had not generally been a noticeable increase in retail prices, businesses had been enjoying low transports costs because of low crude oil prices.

He said oil was now about US$60 a barrel, compared to $40 earlier in the year, created a “double whammy” for retailers.

“As we move into the second half of the year, a lower Australian dollar combined with higher petrol prices has the potential to put upward pressure on the price of imported goods,” he said.

Financialtribune.com