For small business owners, there has rarely been a better time to take advantage of the h3 Australian dollar.
According to the latest quarterly survey of economists by the Australian Financial Review, the local currency will maintain its current high level against the benchmark US dollar and other major currencies for at least the next three to six months¹.
In its January 7 report, the financial daily's survey of market economists showed a median forecast of US$1.04 in three months time, slightly easing to US$1.03 in six months. The Australian dollar was trading at US$1.0499 at 11 pm (AEST) on January 7, while on the same day it also reached its highest level since September 2008 against the Japanese Yen, reflecting such countries' aggressive credit easings.
Australia's national triple-A credit rating, relatively high interest rates and solid economic growth have made the dollar a favourite among international investors. This is likely to continue for the immediate future despite predicted interest rate cuts, according to analysts.
For exporters, such as those in the tourism industry or manufacturing, the h3 local currency makes international sales even more challenging than usual. However, for importers and those buying goods and services from overseas, the next few months present a perfect opportunity to exploit the buoyant dollar.
Buy now and lock in the gains
Lock in the benefits of the high dollar by reaching long-term contracts with overseas suppliers at favourable prices. If possible, try negotiating for the next several months in advance to ensure certainty.
Consider bulk buying of products from overseas, or acquiring any expensive pieces of equipment sooner rather than later. For online buying, items such as cameras and computers can be obtained more cheaply and do not incur import tax, unlike cars.
Internet services such as Google AdWords or website hosting can be obtained more cheaply, since many are priced in US dollars. Another strategy is converting some of your Australian dollars into the relevant overseas currency now to boost your future spending power.
Expand your business overseas
If you have ever considered making an overseas acquisition to expand your business internationally, now is the right time. This is particularly the case in North America and Europe, where skilled labour is available cheaper and more plentifully than usual and quality business assets can be bought to add to your global offering.
Once you are operating in an overseas country, you can take advantage of lower costs to maximise profits on sales to the domestic market. When it comes to the international online competition, if you can't beat them, why not join them?
International marketing on the cheap
While scouting out business opportunities overseas, you will also be travelling at more affordable levels than usual due to the strength of the Australian dollar. Attending international trade fairs or conferences has rarely been cheaper, giving you the opportunity to promote your business to an international audience.
It also may be worthwhile scouting for talented staff interested in joining your business in Australia, taking advantage of their international know-how and experience and broadening your human resources to trade internationally.
Reduce supply costs
Even for exporters, it can be possible to benefit from the h3 local currency by extracting cost savings from suppliers. For importers, lower wholesale prices mean bigger margins, so it should be possible to negotiate a better deal.
Given the constant fluctuations in international currency markets, taking advantage of the h3 Australian dollar while you can is a smart strategy. Considering that the Australian dollar was worth just US$0.47 in 2001, every dollar earned locally is now worth more than double, giving the whole country a big boost to its buying power.
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This article represents the views of the author only and not those of American Express.
Anthony is a communication consultant at BWH Communication and a freelance writer with 15 years' experience in the stockbroking and media industries of Australia and Asia. He is a regular writer on business and other issues for publications in Australia and Japan. He consults on communication strategy to businesses ranging from private enterprises to professional service firms and publicly listed companies, with a particular interest in entrepreneurship in all its forms.