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Profits of gloom as dollar boomsIndustry bearing the bruntFrom Page 55
‘‘The value of the dollar is keepingour traditional market of Europe andAmerica away. . . while driving Aust-ralians off to exotic destinations,’’ hesaid.
‘‘When your budget gets blown outby 20 per cent and you are a budgettraveller, (holidaying in Australia) is abig decision.
‘‘You are not going to stay as long,and you are not going to spend asmuch.’’
Tourism Whitsundays CEO PeterO’Reilly said international touristsnow had half the money to spend ontrips Down Under and were votingwith their feet.
The decline in the backpackingmarket had been the most noticeable,which Mr O’Reilly linked to a drop ininternational students.
There are currently 41,500 lessinternational students studying inAustralia, compared with this time lastyear, according to Federal Govern-ment figures.
International student ambassadorfor Brisbane Matthew Ram arrived inQueensland to study medicine on aUS scholarship two years ago.
But he is now considering leavingfor home halfway through the course
due to the higher cost of living underthe current exchange rate.
He said two years ago, his$US50,000-a-year scholarshipcovered tuition and cost of living, butnow barely covered his tuition, forcinghim to take out a US loan.
‘‘If I finish my education here I amlooking at going into debt. I am at$20,000 (debt) now, but it could becloser to $100,000 by the time I’mdone,’’ he said.
Queensland’s film industry has alsotaken a battering, with some Indianfilm producers now opting for cheaperlocations.
Two years after attracting the big-budget Narnia film, the location is nolonger proving as attractive for over-seas productions.
Gold Coast visual effects companySMI Photon blamed the strong dollarfor a decision to move its primarybusiness to China about a year ago.
‘‘The Australian dollar is virtually atparity with the US dollar . . . andlooking like it will stay high for a longtime ahead,’’ Photon chief executiveDale Duguid said in a statementexplaining the decision.
For exporters, the exchange rate hasfrozen any expansion plans.
Two years ago, medical equipment
manufacturer Cook Asia Pacific in-vested in a new $A30 million manu-facturing facility in Brisbane.
Finance director Mark Muller saidthat equated to a cost of $US23 millionfor its parent company, global com-pany Cook Medical.
‘‘If we would actually do that now itwould be $32 million and in a marketwhere the profit’s just not the same astwo years ago,’’ Mr Muller said.
‘‘The cost of our labour in worldterms has gone up 50 per cent in twoyears,’’ he said.
‘‘If we were trying to do thatinvestment now, we may not get thesame decision.’’
‘‘There is not a lot of incentive rightnow to increase manufacturing out ofAustralia.’’
Mr Muller said the soaring cost ofpower and water and lack of govern-ment funding for clinical trials to bringnew products to market were part ofthe problem.
Queensland Treasurer AndrewFraser said a massive drop in exportshad been most prevalent in theresources sector, with hard coking coalexports falling by $1.8 billion over theMarch quarter.
SUGAREVERY time the Australiancurrency rises in value against itsUS counterpart, Queenslandcanegrowers can kiss goodbye tomillions of dollars in earnings.
The soaring Aussie dollar hasproven to be the achilles heel forcane farmers, who are nowearning a sweet $450 a tonne forexported raw sugar.
The world sugar trade operatesin US dollars, meaning that as the
Australian dollar rises, the returnto Queensland farmers declines.
Queensland Canegrowers chiefexecutive Steve Greenwood saidthe Aussie strong dollar was ahuge dampener for an otherwisestrong industry.
‘‘For every cent increase inthe dollar, at the moment we areseeing a reduction of $4.50 pertonne of sugar,’’ Mr Greenwoodsaid.
TOURISMTHE SUN is shining and skies aclear blue, but tourism operatorsin the Whitsundays aredesperately awaiting the usualrush of tourists.
Tourism providers on thedoorstep to the Great Barrier Reefsay not only has the strong dollarmade the destination lessattractive for overseas visitorsfrom the United Kingdom and theUS, it was also sending droves ofdomestic holidayers to cheaperlocations overseas, such as Bali.
This time last year, WhitsundaySailing Adventures marketingdirector Gabby Shaw said half the
number of seats on their sailingboats would be booked twoweeks out from departure date.
But today, those same boats,which take groups of up to 25people, are empty two to threedays out from departure date.
Ms Shaw said regular bookingsof their sailing trips byinternational students had alsodried up.
She said price-cutting in theindustry had added to thedamage.
‘‘Just in the last two days wehave had to lay off our rep downin Sydney,’’ she said.
STUDENTSWHEN University of Queensland businessstudent Mowd Hassan chose to study inAustralia two years ago, affordability was akey part of the decision.
Compared with other study destinationsof a similarly high standard, Australia wasthe less expensive option.
But today’s less favourable exchangerate has taken its toll on Mr Hassan, whoseparents are now having to send moremoney to cover his living costs than whenhe began his studies last year.
‘‘It has increased tremendously,’’ he said.‘‘My parents have to send me 900
ringgit ($247) just to get (text) books.‘‘It has been a taxing time for me in
terms of my study and cost of living overhere. I think it is really expensive here.’’
Mr Hassan, who is on a Malaysiangovernment scholarship, shares a house inthe university suburb of St Lucia with sixother people.
This year the rent increased by $50. Hesaid the rising cost of fruit and vegetableshad also made it harder to make ends meet.
RETAILAS MAJOR retailers reelfrom a surge in onlineshopping fuelled by thestrong Aussie dollar, somesmall retailers say it is notall bad news.
Creator of Queenslandchildren’s designerclothing brand Tilly &Otto, Kavala Williams saida strong dollar had cut herproduction costs.
Mrs Williams (pictured),based in the southeastQueensland seasidesuburb of Redcliffe, saidthe cost of importingfabric from the US for herchildren’s line had beenslashed by 20 per centcompared with last yeardue to the dollar.
‘‘That is definitely apositive for me because Iimport all my fabrics fromthe US. The strength ofour dollar has certainlylowered my productioncosts,’’ she said.
She was already makingsavings by importing allher fabrics at a third of thelocal price and by sellingonline.
FILMTWO years after luring the$150 million Narnia blockbusterto our shores, big-budget filmproducers are far from beatingdown the door.
The embattled Queensland filmindustry is struggling to attractbig films, with Gold Coast-basedproduction company boss GeorgeVasiliadas saying there is a lowchance of repeating the successsoon with the dollar so strong.
‘‘With the big-budget films, Ican’t see them coming in a hurry,’’he said. ‘‘A lot of these offshoreproductions will have two tothree countries as an optionwhere they’d like to film.’’
EXPORTFOR Brisbane manufacturer AllanMorrison, managing director ofBSD Robotics, a surging dollar canonly bring bad news.
With 98 per cent of goodsproduced at BSD Robotic’s AcaciaRidge factory exported, a slightincrease in the dollar creates ahuge impact on its internationalcompetitiveness.
A few months ago thecompany, which manufactureslaboratory instruments, wasforced to offer prices todistributors in Australian dollarsrather than US dollars, as a bufferagainst an unfavourableexchange rate. This meantpassing on some of the pain todistributors and customers.
‘‘There is absolutely no doubtthat it has been a problem,’’ MrMorrison said.
COMMENTTerry McCrann
Battling atwo-speedeconomyOUR dollar is headed higher. Onlyanother shock global meltdown willstop it.
It will certainly go through the$US1.10 it just failed to reach a fewweeks ago.
At some point it will probably hit$US1.20. Indeed, if the China boomcontinues, it could quite possiblyreach the all-time record just shy of$US1.50 of the early 1970s.
And in future it could come rightback to parity with the greenback.That’s what a floating currency doesand will ‘‘do more of’’ in an increa-singly volatile world.
Indeed, it was only US63¢ barelytwo years ago, after being almost atparity the year before. So is it just acase of riding out the high dollar forour manufacturers, tourismoperators and the like?
For some, yes; for many, no. Thistime, it really is different.
The production lines that areclosed down won’t be re-openedwith a lower dollar. They will havedisappeared to China and intohistory. But the foreign tourists willcome back with a lower dollar andthe growing prosperity in Asiacreating more of them.
Our wine, education and similarindustries sit somewhere in themiddle. If they can ride out the highdollar, they can prosper when and ifa lower dollar returns.
Indeed, those that really addvalue will survive even in apermanently high-dollar world. Butit will be much tougher and demandreal value to foreign customers.
That’s one of the three things thatmake this high-dollar futuredifferent. We have never had amining boom as big – creating adramatic, permanent ‘‘two-speedeconomy’’.
The second is the internet.Consumers here can access cheapforeign prices directly, bypassinglocal retailers.
The third is the decline of the USand ultimately also the mightygreenback. We don’t want to sinkwith it.
