Hi all,
I was wondering why our AUD has dropped so dramatically in the last half year or so.
Also, what does Australia need to do in order for the AUD to be strong as it once was (2011-mid 2013)?
Cheers.
[ELI5] Why is the Australian dollar so weak atm?
Kewok on 11/04/2015 - 08:37
Last edited 11/04/2015 - 08:38
Last edited 11/04/2015 - 08:38
Comments
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Canadians say the low price of Oil is hurting their economy.
Everywhere a different (perceived) cause is cited.
Could be due to increased costs of Climate Change consequences (eg, storm damage rising with increases in storm intensities & counts.
PS My guess is: The World is getting to know our dim PM… :-/
Or… maybe our Gov't thinks it's helping local Exporters sell our products to a World that "buys cheap" as we all like to do. ;-)
Our PM is a Rhodes Scholar. Are you?
Owwwww,SNAP.
Tony wasnt even academically bright as projected - just about made grade in fact. Here is his transcript
http://www.smh.com.au/federal-politics/political-news/tony-a…
http://www.theguardian.com/world/2013/nov/25/tony-abbott-jus…
Gotta admit, when I found that out the result was not that I had more respect for the man, just less respect for the scholarship.
Nice try. The Unemployment rate is at its highest in 13 years.
The last time it was this high?
You guessed it - when Tony Abbott was the Employment minister.
Abbott has been the best minister at keeping people unemployed in recent decades.
This means he was privileged enough to not pay for his Bachelor of Arts degree. That's all.
No, it means that he was accepted to Oxford University, the most prestigious university in the world; gratis. Go to the best schools in Australia and look at their Rhodes Scholar boards. You might find 10 names on them in 100+ years. It is not a small achievement.
@arcticmonkey: Unemployment rate can only go up from here, as I see a trend in the tech companies that they mostly hire directly from overseas these days. Tech companies here have started playing the same trick that US companies did in the past but in much worst way. The affect can be much worst in Aus job market as the industry is so tiny compared to US market. Once the job is advertised in here for close to half the average market salary for the similar role, no wonder no one who is fit for the role do not apply from the local market unless they too are single and live in shared housing. So the job gets filled from overseas person with the work sponsored visa. Months later the local guys in the team looses their jobs obviously they cost more. That's a terrible trend I see in here now.
What about Italy, Greece, Spain? Not Western Countries. Or you just too blind to have a good look over the pond.
@thorton82:
By the way, so did Bob Hawke, Beazley, Turnbull, a bunch of Nazi generals/sympathisers, Bill Clinton etc etc. I'm just saying that someone who obtained a B.A with very average grades at (an admittedly a good) university doesn't necessarily make a good decision maker. He also apparently only received the scholarship due to his Jesuit Networking.
Anyway, off-topic as I doubt many would acknowledge the fact that he's responsible for whatever state the economy is in.
@Andy-Laa: Maybe are you making an assumptions without knowing.
It could be that some here are just sick of those who want to turn anything into a bash a politician be it on either side. Rather than having at least a semi intelligent discussion.
If we want political commentary we can get enough of that BS in the papers.
Oh and I havent voted on their comments either way.
He is an international embarrassment and it pains me that he is in power.
The OP dealt with his opinion very carefully - he made light it was his opinion and didn't go into bashing him.
OP wrote 5 sentences, in one he gave a personal opinion and labelled it as such. It was due to his anti-Abbott gobbet that people down-voted him, it would be ignorant to pretend it wasn't, despite not being the meat of his point.
@arcticmonkey: That's a great non sequitur. I don't support Abbott but I do support logic.
Claim A - The last time it was this high?
You guessed it - when Tony Abbott was the Employment minister.
Evidence for A - The Unemployment rate is at its highest in 13 years.
A means C - Abbott has been the best minister at keeping people unemployed in recent decades.
Greece's unemployment rate is 26%
Australia's is 6.4%
http://www.abs.gov.au/ausstats/[email protected]/mf/6202.0
Where are you getting your numbers?
As for the cause, the mining boom is ending so miners are getting fired. This is due to international competition with ore production and demand from China. This has nothing to do with Tony.
@IVI:
"Our PM is a Rhodes Scholar. Are you?"
I was told by a WA uni lecturer and Rhodes Scholar, it was paid for by his parents. So I accept your view and will + you, to remove one of the "-19" votes, for what it's worth.
My theory is that Abbott shot to the top as Howard couldn't resist having the "Abbott & Costello" thing happening.
Well neg me bad dudes, if you must, but it's my genuine take on the subject.
Academics aside he sounds like a man without reasoning - stuck to his age old beliefs on everything. The way he shows disdain for science/climate change. Someone who is opposite end of the "smart" scale. Could be an act but still…
I want to neg you so bad but my account isn't 30 days old.
Steve is spot on.
Given Australia's current economic fundamentals, the AUD is still very overvalued at 75c US.
To answer your question, the dollar could go back to where it was if:
- Demand for iron ore and coal went stratospheric.
- All the new mines that the world built when iron ore was $150+ per tonne were closed down.
- The RBA raised interest rates to such an extent that we experienced large capital inflows.
Number three would doubtless send us into a severe recession.
♬ Down down, prices are down ♬
Nice try, Mr Coles.
As Steve says, the things we sell a lot of, coal, iron ore and soon LNG, have all dropped substantially in price.
This means the rest of the world doesn't need to buy as many of our Aussie dollars to purchase our commodities, and supply and demand sees that AUD is consequently lower.
The lower dollar is good for export industries, including tourism and education (where the foreign customer is temporarily here) so is likely to mean our economy performs better than it would with a higher dollar. So more jobs and higher sales of local products that face overseas competitors.It is pretty unlikely the AUD will return to 1USD unless something unexpected happens. That said, I don't think it is likely to fall substantially further either.
Are you sure our exports are ALWAYS priced in Au$'s.
It's possible to write contracts, eg priced in US$
OR any stable currency both parties to the deal like.Yeah, but you'd need to get it changed to AUD if you want to use it in Australia.
If AUD becomes cheaper (compared to USD), then the exporters can charge less in USD and still make off with same amount of AUD.This is where multinationals may have an advantage… those who can afford to hold cash (in diff. currencies) might be able to trade is on some ForEx market, at their convenience.
What?
Almost EVERYTHING is priced in USD, even primary produce is often priced in USD.
Even something like apple exports is almost always price in USD
why does currency rate exist?
who invented it?
why does british currency always been really high, despite being a small country?
Currency rate exists because people want to trade and therefore they need a rate to trade their currency in.
British pound is expensive because 1 pound can get more things than 1 dollar can buy. It's like how yen almost starts from 100s.
If you want to go further than that, i.e why does 1 pound have high purchasing power, I think you'd need to go into history.When you want to trade with somebody you need to agree on a rate, even if it's bartering Eneloops, e.g. I'll give you 50 Eneloops for that phone. But the other person has to be interested in Eneloops in the first place. Currency eliminates having to find something of interest to the other party; everybody can use money for something else. The market determines the rates; if the currency is in demand then sellers can ask more for it.
One pound may be worth more than one AUD, but the salaries there are smaller so the cost of living works out roughly the same for the average person. You can see from cost of living sites that usually the USD is used as the common currency of comparison after conversion. E.g. see numbeo.com. When you do a comparison of two cities or countries, besides the various cost of living ratios, you'll see a purchasing power ratio. This is based on the average salary there. Here's an example. Shows you how expensive Sydney is.
Indices Difference 
Consumer Prices in Barcelona are 35.44% lower than in Sydney
Consumer Prices Including Rent in Barcelona are 45.97% lower than in Sydney
Rent Prices in Barcelona are 61.53% lower than in Sydney
Restaurant Prices in Barcelona are 21.69% lower than in Sydney
Groceries Prices in Barcelona are 42.75% lower than in Sydney
Local Purchasing Power in Barcelona is 18.26% lower than in Sydneythe question is why british pound consistently have been higher/stronger than AUD?
Their country is alot more small than our country.
Do they have a bigger trade market/economy than Australia?
Also they don't even join the EU, even though they are in the same territory/region as other EU currency countries.
@tyler.durden: A pound worth more than an Australian dollar because it can buy more things. That being said, it's like saying why is 100cm same as 1m, when their numbers are different. It's just a different unit. Why countries have different values attached to their currency, 1000 South Korean Won approximiately equals 1 AUD in value for example, that goes into history.
I think you are not understanding my question..
The key question is, is british economy stronger than australia?
is that why the british pound worth more? or can buy more things..@tyler.durden: No, it's just that 1 pound had higher purchasing power than 1 AUD. It's not like Japanese economy is 100x worse than Australian one because 1 yen is 0.01~ AUD. The reason would probably lie between the fiscal policies that both countries had and other historical things that I am grossly oversimplifying.
Currency rate just represents how much one currency worth in terms of other currency. It fluctuates due to exports and imports (i.e. people want more AUD then AUD becomes more valuable), but it also is due to purchasing powers.
Money simply is a paper (or plastic or other tangible things) that has certain value attached to it. How much a unit values would depend on how much money is in the market and how much people want it. A pound worth more than AUD because a pound had higher value attached to it to begin with.
If a country uses unit so that 1 unit (blah) can get me two apples, and if another country uses unit that 1 unit (bleh) can get me one apple, then logically speaking, 1 blah would worth 2 bleh. (in a grossly simple world where the apples are same, only apples available bla blah blah blah blah.)
@tyler.durden: Britain is smaller in land mass than Australia but has a larger population, and a larger economy.
AznMitch is answering your question about the "size" of currencies. But think of this way: Why is a metre larger than a foot? It just happens to be that way. Their pound may be worth more than our AUD, but they get paid less pounds on average so it balances out. They can buy roughly the same number of Eneloops with their salaries. :)
Don't get hung up on exchange rates. If the "sizes" of currency units were important, then you would regard the Japanese Yen as "weak" since it's 1/91th of an AUD as of today. But of course they get paid more of them as salary; and their country is rich.
If you want a tongue in cheek analogy, imagine country E which uses Eneloops as currency and country S which uses SD cards. They want each other's goods so they negotiate an exchange rate. In times when SD cards are in demand, S can ask for more Eneloops per SD card. Likewise, when Eneloops are in demand, E can ask for more SD cards per Eneloop. That's how the exchange rate varies.
You have not noticed the drop in the GBP ? You're asleep under a rock?
Well since most of my purchases are either in AUD or USA dollars
I haven't checked in a long time..
Your analogy of eneloop makes more sense.
By your analogy, are you saying more people want to buy/use/trade in british money than australian money?
Does britian have more exports/trade than australia?
What are they exporting more of than australia?I know australia mainly has the mining, and cattle/sheep meat industry…
====
Also the key question is when a person visits another country do they feel richer or poorer..
Right now a British person can trade their $1 GBP for $1.92 AUD.
So roughly for every british dollar, they get 2 australian dollar.Now If I went to britain, I would only get approx 50 british cents for every $1 Australian dollar.
So I feel poorer…
Now If I were to go to a south east asian country, I would feel richer..
Not because I can swap $1 for $10000 asian dollar, but more to do with being able to buy more stuff with that $10000 asian dollar..@tyler.durden: More to the point, the currency is a proxy for the things that the money can buy. Exports can also be intangibles like services. London is a major financial centre.
Whether you feel richer or poorer depends on what you are trying to buy. If it's something local like street food in SEA countries, then you are a rich man because the prices are set for locals. But if it's something imported, then you may pay the same or even more than your home country. E.g. I found that premium coffee in Thailand was just as much as here, after conversion. Of course it's even more costly for locals who get paid less than we do.
Also remember that British people get paid less pounds than we do AUD for the same kind of job. So they will have less pounds to go on holiday with. You shouldn't just look at the figures but how much it's actually costing you. You may get only 50p for 1 AUD but then a can of drink from the supermarket might be 25p = 50c.
That's just the surface. In real life it gets very complicated, people make convoluted financial bets that depend on rates going one way or another which can get very far away from the original idea of trade. Throw in a good measure of crowd psychology and sometimes hysteria. A bit of good or bad news about the economy can make a small difference to the rate which can mean heaps of money when multiplied by the size of the bet. That's why the market watches very closely what the RBA does to the interest rate.
@tyler.durden:
Brother, the reason why no one is giving you a straight answer is because they don't know. (But want to appear financially intelligent)The reason = there is not as many Pounds printed versus the size of their economy (compared with other countries). Not as many = higher value.
Likewise, folks were talking about Japs. MUCH MUCH more Yen printed, still a bigger economy than UK, but still mountains of more Yen in circulation. So still not worth much. Yes, the Yen is not worth much. (Nothing to do with standard of living)
Supply and demand. Nothing more or less.
Money simply is a paper (or plastic or other tangible things) that has certain value attached to it. How much a unit values would depend on how much money is in the market and how much people want it. A pound worth more than AUD because a pound had higher value attached to it to begin with.
I've mentioned this before, which pretty much is what you are saying.
Even that is not the end of the story.
Even though aud to jap yen is 1:92, fact is even though you convert your 1 to 92, question really is what can you buy with 92 yen? Diddly squat.
Its only taking your money to countries like Malaysia where your value is high and cost of living is low that you feel rich
True,
that's why I mention going to a south east asian country, you feel really rich..
cos of what you can buy with converted money..
Whether a currency's number is high or low compared to another is pretty much irrelevant. Go to Japan and you would see that a can of Coke from a vending machine costs 150 yen, which looks expensive compared to $2.20 here, but it's actually relatively cheaper. It's the ratio of living costs to income, and comparisons to other countries and their standard of living that actually matters.
Who invented currency? In the Middle East and North Africa about 4000 years ago.
Why does currency exist? Without it the only way to obtain goods and services would be through bartering. If you happen to find yourself growing something that there's no immediate demand for locally you would starve without currency.
You reading my post wrong
I meant "currency rate"
If that wasn't clear..
ie
Why currency rate exist and how/who/why it was created?
The rates are created by markets through demand for imports and exports, and how much currency is being created by a government. Trying to manipulate the relative value of currencies against one another works to some extent, but the market always breaks blatant manipulation. Have a look at what's happening in Venezuela at the moment with the official and black market exchange rates versus the US dollar.
What was the starting value of a currency versus another and why? Sometimes it's a government decision to start on a 1 to 1 basis, and then the market takes over. Other times values of currency are set according to relative sizes of economies and the amount of money in circulation. Have a look at the launch and valuing of the Euro for a good example. http://en.wikipedia.org/wiki/History_of_the_euro#Launch
Speculators trying to profit from currency movements also play a part. If speculators believe the RBA will continue to cut interest rates in Australia they may choose to sell Australian dollars and buy something else, like the US dollar. This pushes the value of our currency down versus the US dollar.
Dude what??? Australia might be bigger in land size but the UK is bigger in almost every other metric. Stronger banks, stronger economy, bigger companies, 3 times more people, SIGNIFICANTLY more political power, greater military power, the list just goes on. Apart from mining, Australia doesn't even compare to the likes of the US or UK.
Also, just because they have a higher currency rate, it doesn't mean diddly squat in terms of economic power. China has a bigger economy than the UK but you can get 9 Chinese yuan for 1 British pound and on the other side of the spectrum 1 British pound will only get you 0.57 Omani Rials despite the fact that the UK's economy is 33.5 times larger than that of Oman.So to summarize the UK is not small by any means, its one of the most powerful countries in the world and until the US dollar took over as the main currency a few decades ago the British pound was the most traded currency in the world for an extremely long time.
That is a good answer, but it is not quite how international trade works. Australia sells our products such as Iron Ore is US Dollars, not AUD. Other countries do not need to purchase AUD to purchase our commodities.
Of course, the big exporters (such as miners) get to sell in USD and convert to AUD locally, so they benefit from the lower AUD. However Australia has a net trade deficit rather than surplus, so this is localized to certain industries and the net flow is not into AUD.
Supporting BHP, Fortesque etc is one of the reasons the RBA wants a lower AUD, so they can hopefully outlive the Chinese miners with higher production costs and survive until Iron Ore prices rise again.
You realise that the period of the high AUD was an anomaly due to our favourable situation then. It may have been good for people importing gear but it hurt export industries, including service exporters in addition to those mentioned by mskeggs. So there was a downside. Exchange rates are at the mercy of the markets with free floating markets so there is nothing that can be done but deal with it.
At least console yourself that it hasn't dropped as much with respect to other currencies that are having problems like the Euro. The real story is the rise of the USD.
In fact, gov'ts (through their national banks) often buy or sell their nation's currency, both to try to affect its value and/or to try to profit from such transactions.
Was it Toronto that just sold its shares in General Motors, making a HUGE win fall profit?
Smart governments (eg, Norway) even set HUGE piles of their Resource Revenues aside.
A country with:
the Practical Wisdom to Stay OUT of Other People's Wars (Sweden's managed to do this for WELL over 200 years… 250 maybe?),
the Practical Wisdom (in Gov't) to Stay OUT of Other People's LIVES (Who Can Marry Who; Who Must Have an Unplanned Baby; etc.)
a clever gov't (making wise investments; NOT building / expanding FIVE (5) coal-exporting ports in Qld! SA's (announced) $20 Billion PIVOT to being a "Nuclear Energy Economy" is Future-oriented & quite intriguing.),
strong assets (eg, oil-rich Norway's HUGE Future Fund & their Thorium R&D Lab impress me greatly; they're Future-focused; AU is lost, eg, following idiots, stuck in the Past: PM),
well-educated people (eg, Taiwan, with a high % of PhD's; wasn't Singapore once headed by a doctor or engineer? AU imports them),
compassion & an ethical compass (eg, how does Jeffrey Sachs' "Age of Sustainable Development" - the Coursera MOOC or his book - strike you?)
a gov't with strength of character to support Science & make evidence-based decisions (rather than ignoring Climate Change, sending young people to War [as an unemployment fix], rather than to uni, at much less cost, etc.),
From what theres tell me: Aussies are have No Respect for Gov'ts & don't have the chutzpah to organise anything better for their kids or themselves…
Who will value what we don't value? That & a big benefits-cost can adversely affect a country's economy.
Examples of idiots & their idiocies:
a Defense minister (some years ago) accepted money or a free apartment from a Chinese woman? (AU gov't being bribed by CN?)
PM unable to respond intelligently to interviewers' questions (Tony, as shown to the World, by John Oliver, on HBO's "Last Week Tonight" - still on YouTube, if you missed it: "Jesus said…" :PM)
Gov't finding NO ways to tax Miners & other polluters etc.
depending on Gambling for too much of gov'ts revenues (not smart, & it adversely affects gamblers & their families)
why should gambling gains NOT be taxed, like other income? (I like a level, but LOW tax on all income, profits, etc. Our gov't isn't able to compute the right LOW level, for such a tax.)
Question time (in Parliament): Why are playground tactics, harassment & verbal abuse tolerated by Speakers?!? (Rebuild the Seating, so that opposing parties all face the Speaker's chair, the front, not across from each other, like silly sports teams?)
During such times, Legislators are being paid HEAP$ to -waste- their time in -dim- theatre performances?!? I'd like to require alcohol & drug tests before each Member of Parliament can enter & take her/his seat.
"End Drink-Lawmaking AND Driving" both cost us HEAPS.
Big problems are being laughed away & just don't get solved!
How can such idiocies give Aussie kids any confidence in our leaders.
Gov't just not working, & those OUTSIDE the "Canberra bubble" - including the World - see it all too clearly!
Who'd invest in a Banana Republic, ie, before all the better-working democracies run out?
My 2.2 cents, only… nothing to see here, folks, move along. ;-0
National banks do intervene in the market but to gain from it, i.e. buy low and sell high. Any attempt to drive the exchange rate a particular way results in the market taking advantage of the intervention and causing the national bank to lose. There are lots of real life examples of this, you just need to look them up.
Tnx.
Not my field, so I'll take your word for it, 'til I hear otherwise. ;-)
I see that you have a few negs for your essay. I don't agree with all of it but it's mostly public available facts. It's seems obvious that the "entitlement" generations don't like it. I like your 2.2 cents and I'll bid it up to 5. Now I'm pulling on my tin foil hat.
Just… wtf?!
"Examples of idiots & their idiocies…"
Gambling:
Pokies informally tax crime at ~40%. Gambling reform will destroyed this. Launderers will need to find another way to bring money onto the books. This could cause more crime. Greens wanted this. Both Labor and Liberals refused.If gambling gains are taxed, losses should be tax deductable. That is incredibly irresponsible.
Tax polluters:
The mining boom was a boom. Now the boom is over mines are letting employees go. Shortening the boom artificially was in no one’s interest.Our manufacturing industry was dying because of our high Aussie dollar. We are now semi-competitive again and still have low interest rates. My completely uninformed opinion is now seems like a better time to force innovation.
Again, both parties said no.
Rhetoric:
Politics is about winning influence. The childish rhetoric is for sound bites to influence the public via the news, not to win a debate in parliament. It works. All parties are guilty.Last Week Tonight:
Our PM got hit with a question out of left field. He looked like he felt betrayed. Yes it was a valid question, but providing a straight answer would have made him look stupid to a different segment of voters. I don't agree with him deflecting that question, but I didn't vote for him.Defence:
Wrong party. Fitzgibbon was Labor.The world is never black or white. Compromises have to be made. Yes they suck, but ruling with an iron fist would be worse.
Although you make many good points I think Australia doesn't have the ability to just "stay out of wars that don't concern us". Were part of the commonwealth.
For example ISIL executed a British citizen, basically declaring war on the commonwealth. Not to mention some Australians are now supporting ISIL.
If we did nothing, were basically condoning their actions.
" what chance does Gotham have when the good people do nothing? "
I think China fix it currency to be low, despite owning USA huge debt
That way they continue to get all the manufacturing to be made in china
There are downsides to a fixed currency namely inflation and the cost of keeping large reserves of cash in their reserve bank.
Do you mean how the USA owes China (and Japan) a huge debt?
yes
I dislike this government as much as anyone, but this down turn in our currency was always going to happen. the 1.10 was only driven by macro-economic conditions combined with high resource prices. Neither of those were ever sustainable, and I feel the current exchange rate is far, far more logical than the +1 dollar mark
well said. it is ridiculous that politics is being drawn into this discussion…
Yeah, why the hell are we getting people from Australian schools with education running the country. We should just grab homeless thugs off the streets and give them the power to rule the whole country.. DO IT NOW!!!
Also, what does Australia need to do in order for the AUD to be as strong as it once was (2011-mid 2013)?
If by 'Australia', you mean the Government and The Reserve Bank, they are interested in the opposite and are seeking an even lower relative dollar in order to assist exporters and ultimately boost associated tax revenue.
Another interest rate cut was tipped by most commentators for this week, but the RBA had to factor in the ongoing strength of real estate sales.
Interest rates is one thing, stability of a country is another. Take Switzerland, small country, extremely strong currency despite 0% interest rates, and NEGATIVE interest rate for large sums deposited there. ( Yes, you have to pay the bank to let you have Swiss Francs ).
What investors like is the stability of the nation, and what speculators like, it that the Swiss Franc will gain even more against the other.If America pushes the interest rate up, investing in Bonds ( buying USD ) becomes attractive again.
Unfortunately Australia cannot raise interest rates, as too many people have a mortgage they should not have, and increase in interest rates could trigger the pop of the Housing Bubble, and that's the last thing the government / RBA wants. So expect the rates ( and the AUD ) to stay low for just a bit longer.
i think people need to realise that dollar at $1.00+ is unsustainable and unrealistic
the aus. dollar should be worth 75-85c
i'm guessing it wont get back to $1.00+ due to the fact that the unique set of circumstances that made it possible wont happen again
There's nothing - in principle - to preclude "pegging" one's currency to remain at the same level as any other currency a gov't likes.
Similarly, I want to be free to choose the country my taxes go to - on a daily basis (a bit like Optus' MyPrePaid Daily works) - so I can WITHHOLD my support for useless Wars, & have my day's taxes send to some very poor country, who is NOT -burdening- itself with unnecessary War, or the losses of Life & other injuries that come from it…
…ie, until the decision is made to end involvement in War, at which time, I will have helped a poor country grow, & can redirect my taxes back to AU again. :-)
Your taxes pay for roads, health, education, social services, some emergency services and our sovereignty via defence spending.
As an Australian you are free to leave our country to work and live in 'some very poor country' if you want to pay taxes there.
If you are serious about changing the tax code for all Australian's (and not just yourself), you are free to create a special interest group or even your own political party.
If you want to use your taxes to help poor people in other countries there's something called tax deductible charities.
But your taxes go toward making the country you live in a better place, and pay the people serving your country, and even to address the poverty in your own country
spot on mate… if the dollar is too high or too low it is not good for us long term
all pretty much manipulated.
The AU$ can get back to USD 1.00 if we stop giving away our resources to the Chinese at rock-bottom prices.
Once the Iron Ore is gone then it'll never return. We should be restricting supply & charging the right price for a non-renewable resource.
Andrew Forrest is right: Australia should be capping iron ore production to push the price back up.
Once the Iron Ore is gone then it'll never return.
Maybe we can giveaway Iron ore to bad kids instead of coal in stockings instead.
We should be restricting supply & charging the right price for a non-renewable resource.
Maybe companies still need revenue to avoid apocalyptic worker layoffs, which are illegal in Australia. Profits aren't everything.
Andrew Forrest is right
No, his statement is highly stupid and illegal. Perhaps you'd enjoy the Saudi's doing the same with oil barrel prices, who doesn't enjoy paying more for petrol.
The Saudis are already doing the same with the oil price.
They're the founders & leading members of the OPEC oil cartel.
Unlike Australia, they realise that the stuff they're digging from the ground won't magically replenish itself, so they should charge a fair price for a non-renewable resource.
If Andrew Forrest's statements really are "illegal" then it only means that the law is wrong & is working against Australia's national interests.
Australia's national interests involve us selling iron ore for as high a price as we can get, and if this involves restricting iron ore supply then the law should be changed to allow a cap on the iron ore supply.
In fact the Saudis are doing the opposite of what you suggest Australia do. They are not restricting production so there is glut on the market. The Saudis will not make as much money but this will drive the high cost producers to the wall.
Setting aside the legalities for the moment, Australia may not have price maker power, in economic terms. It doesn't have a monopoly or even a majority share of iron ore production. If you look up the production stats, China itself is in first place, and in third place is Brazil. Say Australia sets the price too high. The customers will say FU and go buy somewhere else. So you end up losing money because you have expenses of production but idle ports. The customers won't buy at your price and all the price fixing will have been to no avail. OzBers should know this sort of bargaining very well.
Of course this also depends on the different types of product, the quality of ore, etc.
Then again the iron industry isn't uniform either. The big boys with lower cost of production and deeper pockets might be happy to tough it out to see a small player like Forrest go bust so they will have larger share later on.
And you simply forget or are unaware why the iron ore price is dropping. China is subsidising their own iron ore producers, so they are selling it cheaper in China, which reduces demand for our iron ore. Very simple, they are putting the squeeze on Australia.
And when some of the players drop out, guess who will buy them and at a discounted dollar rate. China.
China doesnt have the same issues with a power mad senate that just blocks everything which doesnt include spending the next generations wealth.
While Forrest might be looking after the "national" interest, you just cant go public with statements like that.
You think we are going to run out of iron ore in the short term? Maybe in 500 years. But we are still the biggest miner of bauxite and coal, I think we are fine.
Far too late for that, global ore production is now far beyond supply, even if we didnt supply it, China would just get it from brazil and the such.
Too much money was spent in increasing our iron ore output, without any real thought to how long the boom would last. FMG is now making a loss on their ore exports, and the price is likely to only continue dropping
Sucks buying online now :P.
Just buy through other countries, like Canada or the EU, which don't have the fixed / pegged value problems as the US/UK. usually because of the supply chains setting prices, you just have to somehow find a better / different supplier, usually in another country.
Even HK with its fixed USD price, sometimes ends up being cheaper for goods because the real supplier is usually in china, their local price index offsets the USD / CNY RMB pricing, but it can also be an issue.
for non tech goods, yeah, it really sucks.
This is hard though, Specially when I need to buy hosting and other things. Skyrockets and not even worth doing anymore. Off to Australia i go!
$AUD has dropped as the $USD is rising. Funds and financial institutions are selling the aussie and moving funds back to USA
Finally one that sees it as it is
Australia's relatively high interest rate and stability among advanced economies had attracted overseas institutions seeking better returns on their funds. This increases the demand and the price of the AUD as AUD denominated bonds are purchased.
Now that interest rates are decreasing in Australia and look to be increasing slightly in the US (including a halt to "quantitative easing"), the investment will shift back towards the US. This increases the demand and price of the USD and decreases the demand and price of the currency of the countries in which those funds were previously held, as investors sell those bonds to purchase USD denominated bonds.
This is one piece of the pie though. And economists whose job it is to piece this together using other indicators such as mining investment, commodity prices and balance of payments theories still have trouble predicting RBA rate decisions.
Does China fix it currency to be low, despite owning USA huge debt
That way they continue to get all the manufacturing to be made in china?
It's true value should be much higher, since it very rich country…
I'm no expert at all but I'm fairly sure from what I last read that it was like that in the past about a decade ago. But more recently the currency is pretty close to the value it should be. Also just by looking at the conversion rate of about 5-1 AUD doesn't necessarily mean you get that much more. From my experience being there, if you buy the local normal foods and transport and such its cheaper by a fair amount but goods such as electronics, jewelry and western food aren't that much cheaper than here. Pizza hut for instance charges like 80-100 yuan for a large pizza.
I first visited China when $1 got u 7 yuan. Now it's 5! 50 yuan will get you a meal at Maccas.
KEWOK, unfortunately the previous Government thought we could beat a recession by spending all the money we had saved (it appears they just delayed it), and was artificially pumping the economy with hand outs. We might have been better served having a smaller recession at the same time as everyone else and at least we would have been on a level playing field, and then using our savings now to stimulate the economy while everyone else is growing.
If this government want's to hand out cash we could artificially improve things again. But that's not a long term solution as it's debt our kids will need to pay back. The economy will stabilise naturally, with more food exports and tourism becoming more affordable again.
But don't expect parity with the USD anytime soon.
Sounds just like it came from the Liberty party playbook.
How are those core promises going again?
lol. No just a random guy waiting for society to get off the fence, so either party can actually govern.
I'd rather checks and balances (the senate) be in place if it prevents a government from making education just for the wealthy and attempts to kill Medicare as the Liberal government tried to do.
Thanks goodness just enough people resisted the urge to vote for the lying Liberals and instead voted for Labor, Greens, Palmer and the other parties.
@arcticmonkey: Just enough is right, so now a minority of Australians are dictating to the majority. Now is that democracy?
The Senate is an out dated useless group who just deny the elected government (the one the majority voted for) their mandate.
Now BEFORE you scream Liberal party playbook or whatever, keep in mind the same frigging game was played by the Senate when Labor had the majority mandate.
It goes back to the days of the DLP, Harridine and so on. The Greens have been the masters of this. Palmer tried that same game, but it blew up in his face. And look at Jacqui Lambie, voted in by a few thousand people and trying to tell us that she is representing the majority of Australian's.
The problem with "keeping the bastards honest", is that those trying to keep them honest are also bastards
@RockyRaccoon: Nicely said :-D I'm on Team Australia, not Team Liberal, Labour or all the other minority parties. The Government has been limp for a number of years now.
We actually need some Solid Leaders. Any ideas?
@LeavingTheWheel: I cant see that happening when it seems to be the national sport to elect one party but tie it's hands behind it's back with an antiquated senate.
With hindsight only, our forefathers when drawing up the constitution with the senate should have put some sort of time limit on it. Eg 100 years
As it was designed to protect states rights at federation, but as we became a nation it's now being manipulated by parties that are not looking after the states, but their own agenda's.
The real problem are companies like Apple having Billions in Cash, and not spending it in Jobs. Companies like the big banks in Australia, making Billions in profit, and at the same time laying off people. If the companies with huge cash amounts would create some more jobs, and pay their employee better, then there would be more cash to go round, and more products would be sold ( like cars ) and more jobs would be created. But by dishing us up the GFC crisis BS, that has been now 6 YEARS, they all keep our salary low, and give families hardly any excess to spend on the local economy itself.
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Iron ore prices have come crashing down + RBA has cut interest rates + USA is talking about raising their rates later this year.
The good old days of AUD $1.10 are well and truly over and don't expect them to return any time soon. The trend for the Aussie dollar at 76 cents is still down, down, down.