Exporter relief as dollar falls: Economy roundup

The Australian dollar has fallen below US94c for the first time in a month today, and some strategists predict it could go even lower in the weeks ahead.

Australian exporters have struggled with an Australian dollar trading at high levels around the US96c mark over the past year, with many suffering direct hits to their profit margins.

The concerns were only heightened recently when some market watchers started floating the idea that the Australian dollar could be headed for parity with the greenback for the first time in its history.

But recent signs of slowing in the Australian economy – particularly jobs data yesterday which showed a fall in employment for the first time in 19 months – have taken some heat out of the dollar, which at 11.00am today was trading at US93.63c.

St George senior strategist Besa Deda says it is now possible the Australian dollar could fall as low as US92.5c in the weeks ahead.

“We think the Reserve Bank is likely to keep rates on hold, and yesterday’s data was pertinent in bringing markets a bit closer to reality on that front,” Deda says. “The terms of trade story (high minerals prices) will still underpin the dollar, but in the near term we see US93c or even US92.5c as possible.”

But while exporters have something to smile about this morning, the same cannot be said for Tasmanian business owners. The state’s budget, delivered by Treasurer Michael Aird yesterday, bucked the recent trend in other states by not delivering any payroll tax relief, leaving Tassie business owners with a 6.1% payroll tax rate, the highest in the nation.

The budget forecasts a $105 million surplus for 2008-09, rising to $203 million in 2009-10, but also a significant rise in net debt to pay for improved health, education and transport infrastructure. The state’s economy is forecast to grow at a steady 3.25% next year – less if the Gunn’s pulp mill doesn’t go ahead – before falling back to 2.5% in subsequent years.

On the markets today, the S&P/ASX200 has come back after an early lift to be trading at 5319.5, 0.2% down on yesterday’s close, with shares in troubled investment bank Babcock & Brown again falling sharply.