Dollar drama

Australian entrepreneurs clearly need to reset their thinking about the Australian dollar, particularly if they are waiting for a return to the days when the Aussie dollar was sitting under 80c.

The local currency is hovering near 29-year highs today at $US1.02 and is seen as headed towards $US1.03 and perhaps even $US1.04 in the short-term.

Indeed, on Friday ANZ revised its forecasts for the dollar and now expects the dollar to hit $US1.05 by September and remain high as the RBA starts raising rates in the second half of the year.

“The upgrade is underpinned by the prospect of additional Japanese demand for commodities during their post-tsunami rebuilding phase, along with the well-flagged resources investment boom, which will become more evident in the second half of the year,” ANZ said in its latest economic note.

“The Australian dollar should remain above/equal to parity until the June quarter 2012, before slowly declining towards 90c over the longer term.”

It’s not the most comforting news if you are an SME exporter.

While Australia’s top export data will be inflated spectacularly by the resources boom, life is becoming harder for smaller businesses trying to win a share of the global economic recovery.

Indeed, we at SmartCompany noticed a real pull-back from exporting over the last five years, firstly due to the GFC and more recently due to the currency.

This is one area where the Government needs to do what it can to keep encouraging exporters – any further cuts to export programs in this year’s Federal budget in May would be disastrous.

But the rising dollar does also create opportunities, as we have about written before.

Many businesses may find that buying raw materials is cheaper, buying equipment is cheaper, travelling is cheaper and software is cheaper.

It could even be easier to lure overseas staff to Australia – what a great way to import fresh knowledge and experience.

The point is, entrepreneurs need to take advantage of the rising buck. Here a few suggestions on how to do it:

• Pressure suppliers. If their raw material costs are falling, their prices should be too.
• Get your procurement chief to start looking at overseas suppliers. Does it really matter where your stationery comes from?
• Get your IT staff to start looking at sourcing from overseas. Some manufacturers will have terms and conditions that make this difficult, but it’s worth exploring.
• Get training materials from overseas. Books, DVDs and other materials are often much cheaper overseas.
• Have an Australian dollar brainstorming session with key staff. Are there parts of the business that could be outsourced or changed to take advantage?
• Could you look at buying an existing overseas operation to gain access to a new market and hedge some currency risks (for example, by paying locals in the local currency)?