Speaker 1: Already and this is the daily This is the Daily
Speaker 1: ohs oh, now it makes sense.
Speaker 2: Good morning and welcome to the Daily OS. It's Wednesday,
Speaker 2: the eighth of January. I'm Sam. The Australian dollar has
Speaker 2: hit a five year low of sixty one point eighty
Speaker 2: four US since this week. It's a level last scene
Speaker 2: during the early stages of the COVID pandemic. With Donald
Speaker 2: Trump's move into the White House and the potential four
Speaker 2: harsh tariffs on Australia's major trading partner China only a
Speaker 2: few weeks away, the currency plunge has sparked years amongst
Speaker 2: Australian commentators, some politicians and financial experts. But what does
Speaker 2: a dropped Ossie dollar actually mean for us? Not just
Speaker 2: when we're planning a trip overseas, but in day to
Speaker 2: day life. Why is it happening now? Is there real
Speaker 2: reason to panic? To find those answers, I'm joined today
Speaker 2: by the Australian Institution. It's Greg Jericho. Greg, thank you
Speaker 2: so much for joining us. Welcome back to twenty twenty five.
Speaker 2: How's your break?
Speaker 1: It was really good. Lots of sitting on the couch
Speaker 1: watching crickets, so a very nice easy summer.
Speaker 2: Good and the couch is probably where you're going to
Speaker 2: stay because none of us are doing much traveling in
Speaker 2: the year ahead because of this Aussie dollar. And that's
Speaker 2: what I want to talk to you about today. I
Speaker 2: want to read you some headlines, so we've got how
Speaker 2: the falling Aussie dollar could hit you hard. Aussie dollar
Speaker 2: under pressure, Australian dollar weekends to lowest rates since COVID.
Speaker 2: Break this all down for me.
Speaker 1: Yeah, basically, what this is all about is a bit
Speaker 1: of a kerfuffle, I guess, regarding exchange rates and the
Speaker 1: international economy. And it can get kind of confusing for people,
Speaker 1: especially when you see headlines almost suggesting that we should
Speaker 1: be panicking about the falling Astround dollar and you think, geez,
Speaker 1: do I have to go and buy ken goods again
Speaker 1: and go through the whole COVID crisis all over again.
Speaker 1: And to be honest, I think it's a little bit overblown.
Speaker 1: So let's see if we can sort of work through
Speaker 1: what's actually going on here a bit.
Speaker 2: So break down for me what the top line factors
Speaker 2: are that would make a currency drop like the Asi
Speaker 2: dollar drop over the last couple of months.
Speaker 1: Yeah, I mean, what you have to think about with
Speaker 1: the Australian dollar is why are people buying or selling it?
Speaker 1: And really the main reason you want to buy Australian
Speaker 1: dollars is because you're buying stuff from Australia, or you
Speaker 1: think the Australian dollar is a good bet because the
Speaker 1: economy is going well and you think that you know
Speaker 1: the value of the currency is going to rise. And
Speaker 1: while that is a primary factor, the reality is, while
Speaker 1: we're a fairly large economy compared to America and China,
Speaker 1: we're quite small and when they start sort of mucking about,
Speaker 1: we get caught up in the wash. And that's really
Speaker 1: what we've seen here because there's a couple of things
Speaker 1: at play. One, China's economy is struggling a bit, and
Speaker 1: so as a result, they're not buying as much stuff,
Speaker 1: or their demand for the stuff that they get from us, mainly,
Speaker 1: iron ore isn't as great as it once was, and
Speaker 1: sort of the Australian dollar is viewed by investors a
Speaker 1: bit of a proxy for the price of iron ore,
Speaker 1: and also how well China is doing, because generally we
Speaker 1: know if China's doing well, Australia does well. So we've
Speaker 1: got that in play. Also, what we've got is America
Speaker 1: actually doing kind of okay, which certainly Carmala Harris and
Speaker 1: Joe Biden have been trying to tell everyone that actually
Speaker 1: the American economy is doing well. That did quite cut
Speaker 1: through during the election. But then you also throw in
Speaker 1: Donald Trump, and Donald Trump is promising to raise tariffs
Speaker 1: on everything coming into America and especially imports from China.
Speaker 1: And what that means is everyone's thinking, oh God, China's
Speaker 1: already struggling a bit, is this going to hurt China
Speaker 1: even more? And basically we've just been caught up in that.
Speaker 1: It's got very little to do with Australia. It's all
Speaker 1: about China being weak, America kind of attacking China with tariffs,
Speaker 1: and we caught up in the wash.
Speaker 2: Why do you think commentators journalists go to that level
Speaker 2: of panic language with something like this, what are the
Speaker 2: consequences of a week Australian dollar?
Speaker 1: Yeah, it's almost a bit perplexing to me. Well, not perplexing,
Speaker 1: given I have worked in media for a long time,
Speaker 1: so I know there's always you know, clicks with a
Speaker 1: headline that is all scary, scared quotes work well, but
Speaker 1: one of the things about an exchange rate is it's
Speaker 1: neither good nor bad. Now, certainly if you're thinking of
Speaker 1: traveling overseas, it's bad because if you think of it
Speaker 1: in dollar terms. Let's think of it.
Speaker 2: You're booking a one hundred dollars a night room at
Speaker 2: a hostel in New York. That one hundred dollars is
Speaker 2: going to cost you more Ausie dollars.
Speaker 1: Yeah, yeah, So basically, I mean the classic when I
Speaker 1: last went over to America a long time ago, in
Speaker 1: the winter of two thousand and one, the Aussie dollar
Speaker 1: was worth fifty US cents. Basically I was paying double.
Speaker 1: If it was one dollar US, that was costing me
Speaker 1: two dollars Australian, so very expensive. So when the Aussie
Speaker 1: dollar falls, as it kind of has, it's gone from
Speaker 1: about sixty five cents to about sixty two US cents,
Speaker 1: that means everything is a bit more expensive. So that's
Speaker 1: not good for people who are thinking of traveling. But
Speaker 1: let's be honest, that's not a big impact on our economy,
Speaker 1: and we don't really care if people were going to travel.
Speaker 1: We'd actually it'd be better for our economy if they
Speaker 1: stayed home and traveled to Queens Stand or wherever where
Speaker 1: it really hurts us. Think of it in terms of
Speaker 1: us buying stuff. So, yes, that accommodation in America is
Speaker 1: now more expensive. But let's say we were instead of
Speaker 1: buying a hotel room in America, we're buying, say a book,
Speaker 1: or we're buying, say an electric good from America. With
Speaker 1: a low or a falling exchange rate, that makes those
Speaker 1: imports more expensive. And where we really get hit by
Speaker 1: this is, of course, when it comes to petrol prices,
Speaker 1: because petrol prices are all imported. Essentially we're importing our
Speaker 1: oil and it's all dependent on the world price of oil,
Speaker 1: and so when our Australian dollar goes gets weaker, all
Speaker 1: other things being equal, we pay more for petrol and
Speaker 1: that of course means our inflation generally goes up a bit.
Speaker 1: So that certainly hurts us and not a good good
Speaker 1: news during a cost of living crisis where we're already
Speaker 1: feeling the pinch. And so that's where the main scare
Speaker 1: is coming from. And you might think, okay, so it's
Speaker 1: all bad news. Well yes and no, because now let's
Speaker 1: flip the whole thing.
Speaker 2: Yeah, who benefits who benefits from a weak currency.
Speaker 1: Yeah, let's say you're a company who is exporting to America.
Speaker 1: Suddenly it's actually cheaper to buy stuff from Australia. So
Speaker 1: if you're exporting, you're actually benefiting from that because your
Speaker 1: company's over in America can buy more of your stuff
Speaker 1: for basically the same price, and so it actually helps
Speaker 1: the economy that way. So we get hurt by higher imports,
Speaker 1: we get help by lower prices for our exports. We
Speaker 1: still get paid in Australian dollars, so it's all good
Speaker 1: for us. So it's very much the swings and roundabouts.
Speaker 1: But you know, certainly most of the panic is a
Speaker 1: little bit in sort of the Donald Trump joker card
Speaker 1: of not really knowing is he going to follow through
Speaker 1: and slap a sixty percent tariff on on everything coming
Speaker 1: from China. If he does that, that could really wreck
Speaker 1: some havoc and we might see the dollar start going
Speaker 1: below sixty US cents. But as is always the case
Speaker 1: with Donald Trump, who they all knows really what he's
Speaker 1: going to do.
Speaker 2: Well, I find it really interesting how in the economy,
Speaker 2: and I've kind of picked this up through a couple
Speaker 2: of conversations with you over the last year or so,
Speaker 2: there tends to be a little bit of speculation being
Speaker 2: built into the prices of stuff, So you know, China's
Speaker 2: currency might be coming down because of the potential of
Speaker 2: Donald Trump being someone in favor of tariffs. Those actually
Speaker 2: haven't happened yet, but it's almost like they're getting ready
Speaker 2: for that. It's funny how then sometimes it the drop
Speaker 2: when he actually does introduce the tariff might not be
Speaker 2: as big as we think.
Speaker 1: Yeah, absolutely right, And certainly if he doesn't raise tariffs
Speaker 1: to sixty percent, then it actually we might see the
Speaker 1: dollar go back up because kind of people go, oh,
Speaker 1: it's not as bad as we feared, so it's all good. Yeah,
Speaker 1: you very much. Right. A lot of the market investors,
Speaker 1: they're all trying to anticipate what's going to happen, because
Speaker 1: that's kind of how you make money. You can't make
Speaker 1: money investing on things that have happened, because everyone's already
Speaker 1: factored that in. And also there's been a lot of
Speaker 1: commentary about interest rates. I'm not as convinced by some
Speaker 1: who are suggesting that this sort of small fall at
Speaker 1: the moment in the Aussie dollar might put off an
Speaker 1: interest rate rise I think that would be a little
Speaker 1: bit silly on behalf the Reserve bank. It's not going
Speaker 1: to have a big impact either way on the value
Speaker 1: of the currency. So if the cost of petrol goes
Speaker 1: up because of our exchange rate, well, raising interest rates
Speaker 1: or keeping interest rates the same isn't going to affect
Speaker 1: that all that much. So there's not much they're going
Speaker 1: to be able to do to affect the impact. When
Speaker 1: we're talking America and China, investors know who's the big
Speaker 1: dogs in that game, and it's certainly not Australia.
Speaker 2: Last question for me, Greg, in this journey that you
Speaker 2: and I are going on building the economic literacy and
Speaker 2: knowledge and understanding how all of this plays into the news,
Speaker 2: what's your advice on how closely we should all be
Speaker 2: paying attention to currencies? Is it something we should be
Speaker 2: checking every week? I mean, is this something that should
Speaker 2: be part of our financial diet.
Speaker 1: I would actually say no, not really. I mean, to
Speaker 1: be honest, I don't check it a lot. And I
Speaker 1: write about this stuff, I mean, and it's always struck
Speaker 1: me as a little bit weird that it is in
Speaker 1: the news every night. We see the value of the
Speaker 1: Aussie dollar and you know, it's important if you are
Speaker 1: traveling going to UK at the moment it is basically
Speaker 1: you're getting half a dollar, you know, and so that
Speaker 1: is I guess important. But if you're not traveling, and
Speaker 1: if you're not an importer and exporter, it's kind of
Speaker 1: not really all that important. It's not going to have
Speaker 1: a major impact unless there is a massive plunge one
Speaker 1: way or the other.
Speaker 2: I mean, is massive, like if it gets to fifty
Speaker 2: cents or lower.
Speaker 1: Yeah, and you know, if it plunges like five to
Speaker 1: ten cents in a week, that's where you start thinking,
Speaker 1: oh gosh, there's something wrong afoot and there might have
Speaker 1: to be impacts. Some people might be able to recall
Speaker 1: about a decade or so when we reach parity with
Speaker 1: the US dollar and it was great. Everyone was getting
Speaker 1: on Amazon and buying books and shopping and thinking this
Speaker 1: is fantastic. Meanwhile, this was horrible for Australia's economy because
Speaker 1: our exports, especially manufacturing, really suffered because it was very
Speaker 1: expensive to export straying cars and things like that, and
Speaker 1: it really hurts. So it's always I think a bit
Speaker 1: of a warning not to get too caught up in
Speaker 1: the daily movements and think, oh god, it went up
Speaker 1: you know, zero point two five percent? Is that? Ma,
Speaker 1: Should I get really concerned? I don't think so. I
Speaker 1: think worry more about things like, you know, the unemployment
Speaker 1: rates and just your own sort of cost of living
Speaker 1: and looking at what's happening with petrol prices and interest rates,
Speaker 1: rather than the minutia of exchange rates. Unless there is
Speaker 1: a real sort of weirdness happening, I don't think people
Speaker 1: need to which I'm sure they're not watching the six
Speaker 1: pm news. I don't know I've watched it's the six
Speaker 1: pm news, But certainly there's no need to be looking
Speaker 1: at the currency market fluctuations unless you happen to be
Speaker 1: about to go off for a nice holiday.
Speaker 2: Greg Jericho from the Australian Institute, thank you for getting
Speaker 2: off the couch and pauson the cricket to have a
Speaker 2: chat with me today. Really appreciate you going beyond those
Speaker 2: headlines and talking us through what this all means.
Speaker 1: No, is Sam really good to chat.
Speaker 2: It's always such a pleasure to be joined by such
Speaker 2: a level headed economic commentator. That's all I've got time
Speaker 2: for the Daily OS today, though we'll be back again
Speaker 2: with some headlines in the afternoon. Until then, have a
Speaker 2: fantastic hump Day and we'll speak to you later. My
Speaker 2: name is Lily Madden and I'm a proud Arunda Bunjelung
Speaker 2: Calkaton woman from Gadaghl Country. The Daily oz acknowledges that
Speaker 2: this podcast is recorded on the lands of the Gadigol
Speaker 2: people and pays respect to all Aboriginal and torrest Rate
Speaker 2: island and nations.
Speaker 1: We pay our respects to the first peoples of these countries,
Speaker 1: both past and present.