January 7, 2025 • 13 mins
The Australian dollar has hit a five-year low of 61.84 US cents this week - a level last seen during the early stages of the COVID pandemic. With Donald Trump’s move into the White House - and the potential for harsh tariffs on Australia’s major trading partners - only a few weeks away, the currency plunge has sparked fears amongst Australian commentators, some politicians, and financial experts.But what does a dropped Australian dollar actually mean for us - not just when we’re planning a trip overseas, but in day-to-day life? Why is it happening now? Is there real reason to panic? To find those answers, Sam is joined by the Australia Institute’s Greg Jericho.
Host: Sam Koslowski
Guest: Greg Jericho
Producer: Orla Maher
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Already and this is the daily This is the Daily
ohs oh, now it makes sense.
Speaker 2 (00:14):
Good morning and welcome to the Daily OS. It's Wednesday,
the eighth of January. I'm Sam. The Australian dollar has
hit a five year low of sixty one point eighty
four US since this week. It's a level last scene
during the early stages of the COVID pandemic. With Donald
Trump's move into the White House and the potential four
harsh tariffs on Australia's major trading partner China only a
(00:37):
few weeks away, the currency plunge has sparked years amongst
Australian commentators, some politicians and financial experts. But what does
a dropped Ossie dollar actually mean for us? Not just
when we're planning a trip overseas, but in day to
day life. Why is it happening now? Is there real
reason to panic? To find those answers, I'm joined today
(00:58):
by the Australian Institution. It's Greg Jericho. Greg, thank you
so much for joining us. Welcome back to twenty twenty five.
How's your break?
Speaker 1 (01:05):
It was really good. Lots of sitting on the couch
watching crickets, so a very nice easy summer.
Speaker 2 (01:12):
Good and the couch is probably where you're going to
stay because none of us are doing much traveling in
the year ahead because of this Aussie dollar. And that's
what I want to talk to you about today. I
want to read you some headlines, so we've got how
the falling Aussie dollar could hit you hard. Aussie dollar
under pressure, Australian dollar weekends to lowest rates since COVID.
(01:32):
Break this all down for me.
Speaker 1 (01:33):
Yeah, basically, what this is all about is a bit
of a kerfuffle, I guess, regarding exchange rates and the
international economy. And it can get kind of confusing for people,
especially when you see headlines almost suggesting that we should
be panicking about the falling Astround dollar and you think, geez,
do I have to go and buy ken goods again
(01:54):
and go through the whole COVID crisis all over again.
And to be honest, I think it's a little bit overblown.
So let's see if we can sort of work through
what's actually going on here a bit.
Speaker 2 (02:06):
So break down for me what the top line factors
are that would make a currency drop like the Asi
dollar drop over the last couple of months.
Speaker 1 (02:15):
Yeah, I mean, what you have to think about with
the Australian dollar is why are people buying or selling it?
And really the main reason you want to buy Australian
dollars is because you're buying stuff from Australia, or you
think the Australian dollar is a good bet because the
economy is going well and you think that you know
(02:38):
the value of the currency is going to rise. And
while that is a primary factor, the reality is, while
we're a fairly large economy compared to America and China,
we're quite small and when they start sort of mucking about,
we get caught up in the wash. And that's really
what we've seen here because there's a couple of things
(02:59):
at play. One, China's economy is struggling a bit, and
so as a result, they're not buying as much stuff,
or their demand for the stuff that they get from us, mainly,
iron ore isn't as great as it once was, and
sort of the Australian dollar is viewed by investors a
(03:20):
bit of a proxy for the price of iron ore,
and also how well China is doing, because generally we
know if China's doing well, Australia does well. So we've
got that in play. Also, what we've got is America
actually doing kind of okay, which certainly Carmala Harris and
Joe Biden have been trying to tell everyone that actually
(03:41):
the American economy is doing well. That did quite cut
through during the election. But then you also throw in
Donald Trump, and Donald Trump is promising to raise tariffs
on everything coming into America and especially imports from China.
And what that means is everyone's thinking, oh God, China's
(04:02):
already struggling a bit, is this going to hurt China
even more? And basically we've just been caught up in that.
It's got very little to do with Australia. It's all
about China being weak, America kind of attacking China with tariffs,
and we caught up in the wash.
Speaker 2 (04:20):
Why do you think commentators journalists go to that level
of panic language with something like this, what are the
consequences of a week Australian dollar?
Speaker 1 (04:31):
Yeah, it's almost a bit perplexing to me. Well, not perplexing,
given I have worked in media for a long time,
so I know there's always you know, clicks with a
headline that is all scary, scared quotes work well, but
one of the things about an exchange rate is it's
neither good nor bad. Now, certainly if you're thinking of
traveling overseas, it's bad because if you think of it
(04:55):
in dollar terms. Let's think of it.
Speaker 2 (04:58):
You're booking a one hundred dollars a night room at
a hostel in New York. That one hundred dollars is
going to cost you more Ausie dollars.
Speaker 1 (05:04):
Yeah, yeah, So basically, I mean the classic when I
last went over to America a long time ago, in
the winter of two thousand and one, the Aussie dollar
was worth fifty US cents. Basically I was paying double.
If it was one dollar US, that was costing me
two dollars Australian, so very expensive. So when the Aussie
(05:27):
dollar falls, as it kind of has, it's gone from
about sixty five cents to about sixty two US cents,
that means everything is a bit more expensive. So that's
not good for people who are thinking of traveling. But
let's be honest, that's not a big impact on our economy,
and we don't really care if people were going to travel.
(05:48):
We'd actually it'd be better for our economy if they
stayed home and traveled to Queens Stand or wherever where
it really hurts us. Think of it in terms of
us buying stuff. So, yes, that accommodation in America is
now more expensive. But let's say we were instead of
buying a hotel room in America, we're buying, say a book,
(06:10):
or we're buying, say an electric good from America. With
a low or a falling exchange rate, that makes those
imports more expensive. And where we really get hit by
this is, of course, when it comes to petrol prices,
because petrol prices are all imported. Essentially we're importing our
oil and it's all dependent on the world price of oil,
(06:35):
and so when our Australian dollar goes gets weaker, all
other things being equal, we pay more for petrol and
that of course means our inflation generally goes up a bit.
So that certainly hurts us and not a good good
news during a cost of living crisis where we're already
feeling the pinch. And so that's where the main scare
(06:58):
is coming from. And you might think, okay, so it's
all bad news. Well yes and no, because now let's
flip the whole thing.
Speaker 2 (07:05):
Yeah, who benefits who benefits from a weak currency.
Speaker 1 (07:08):
Yeah, let's say you're a company who is exporting to America.
Suddenly it's actually cheaper to buy stuff from Australia. So
if you're exporting, you're actually benefiting from that because your
company's over in America can buy more of your stuff
for basically the same price, and so it actually helps
(07:30):
the economy that way. So we get hurt by higher imports,
we get help by lower prices for our exports. We
still get paid in Australian dollars, so it's all good
for us. So it's very much the swings and roundabouts.
But you know, certainly most of the panic is a
little bit in sort of the Donald Trump joker card
(07:52):
of not really knowing is he going to follow through
and slap a sixty percent tariff on on everything coming
from China. If he does that, that could really wreck
some havoc and we might see the dollar start going
below sixty US cents. But as is always the case
with Donald Trump, who they all knows really what he's
going to do.
Speaker 2 (08:13):
Well, I find it really interesting how in the economy,
and I've kind of picked this up through a couple
of conversations with you over the last year or so,
there tends to be a little bit of speculation being
built into the prices of stuff, So you know, China's
currency might be coming down because of the potential of
Donald Trump being someone in favor of tariffs. Those actually
(08:35):
haven't happened yet, but it's almost like they're getting ready
for that. It's funny how then sometimes it the drop
when he actually does introduce the tariff might not be
as big as we think.
Speaker 1 (08:46):
Yeah, absolutely right, And certainly if he doesn't raise tariffs
to sixty percent, then it actually we might see the
dollar go back up because kind of people go, oh,
it's not as bad as we feared, so it's all good. Yeah,
you very much. Right. A lot of the market investors,
they're all trying to anticipate what's going to happen, because
that's kind of how you make money. You can't make
(09:08):
money investing on things that have happened, because everyone's already
factored that in. And also there's been a lot of
commentary about interest rates. I'm not as convinced by some
who are suggesting that this sort of small fall at
the moment in the Aussie dollar might put off an
interest rate rise I think that would be a little
bit silly on behalf the Reserve bank. It's not going
(09:30):
to have a big impact either way on the value
of the currency. So if the cost of petrol goes
up because of our exchange rate, well, raising interest rates
or keeping interest rates the same isn't going to affect
that all that much. So there's not much they're going
to be able to do to affect the impact. When
we're talking America and China, investors know who's the big
(09:53):
dogs in that game, and it's certainly not Australia.
Speaker 2 (09:56):
Last question for me, Greg, in this journey that you
and I are going on building the economic literacy and
knowledge and understanding how all of this plays into the news,
what's your advice on how closely we should all be
paying attention to currencies? Is it something we should be
checking every week? I mean, is this something that should
be part of our financial diet.
Speaker 1 (10:18):
I would actually say no, not really. I mean, to
be honest, I don't check it a lot. And I
write about this stuff, I mean, and it's always struck
me as a little bit weird that it is in
the news every night. We see the value of the
Aussie dollar and you know, it's important if you are
traveling going to UK at the moment it is basically
(10:38):
you're getting half a dollar, you know, and so that
is I guess important. But if you're not traveling, and
if you're not an importer and exporter, it's kind of
not really all that important. It's not going to have
a major impact unless there is a massive plunge one
way or the other.
Speaker 2 (10:56):
I mean, is massive, like if it gets to fifty
cents or lower.
Speaker 1 (11:00):
Yeah, and you know, if it plunges like five to
ten cents in a week, that's where you start thinking,
oh gosh, there's something wrong afoot and there might have
to be impacts. Some people might be able to recall
about a decade or so when we reach parity with
the US dollar and it was great. Everyone was getting
on Amazon and buying books and shopping and thinking this
(11:22):
is fantastic. Meanwhile, this was horrible for Australia's economy because
our exports, especially manufacturing, really suffered because it was very
expensive to export straying cars and things like that, and
it really hurts. So it's always I think a bit
of a warning not to get too caught up in
the daily movements and think, oh god, it went up
(11:45):
you know, zero point two five percent? Is that? Ma,
Should I get really concerned? I don't think so. I
think worry more about things like, you know, the unemployment
rates and just your own sort of cost of living
and looking at what's happening with petrol prices and interest rates,
rather than the minutia of exchange rates. Unless there is
(12:09):
a real sort of weirdness happening, I don't think people
need to which I'm sure they're not watching the six
pm news. I don't know I've watched it's the six
pm news, But certainly there's no need to be looking
at the currency market fluctuations unless you happen to be
about to go off for a nice holiday.
Speaker 2 (12:28):
Greg Jericho from the Australian Institute, thank you for getting
off the couch and pauson the cricket to have a
chat with me today. Really appreciate you going beyond those
headlines and talking us through what this all means.
Speaker 1 (12:38):
No, is Sam really good to chat.
Speaker 2 (12:41):
It's always such a pleasure to be joined by such
a level headed economic commentator. That's all I've got time
for the Daily OS today, though we'll be back again
with some headlines in the afternoon. Until then, have a
fantastic hump Day and we'll speak to you later. My
name is Lily Madden and I'm a proud Arunda Bunjelung
(13:02):
Calkaton woman from Gadaghl Country. The Daily oz acknowledges that
this podcast is recorded on the lands of the Gadigol
people and pays respect to all Aboriginal and torrest Rate
island and nations.
Speaker 1 (13:13):
We pay our respects to the first peoples of these countries,
both past and present.
Already and this is the daily This is the Daily
ohs oh, now it makes sense.
Speaker 2 (00:14):
Good morning and welcome to the Daily OS. It's Wednesday,
the eighth of January. I'm Sam. The Australian dollar has
hit a five year low of sixty one point eighty
four US since this week. It's a level last scene
during the early stages of the COVID pandemic. With Donald
Trump's move into the White House and the potential four
harsh tariffs on Australia's major trading partner China only a
(00:37):
few weeks away, the currency plunge has sparked years amongst
Australian commentators, some politicians and financial experts. But what does
a dropped Ossie dollar actually mean for us? Not just
when we're planning a trip overseas, but in day to
day life. Why is it happening now? Is there real
reason to panic? To find those answers, I'm joined today
(00:58):
by the Australian Institution. It's Greg Jericho. Greg, thank you
so much for joining us. Welcome back to twenty twenty five.
How's your break?
Speaker 1 (01:05):
It was really good. Lots of sitting on the couch
watching crickets, so a very nice easy summer.
Speaker 2 (01:12):
Good and the couch is probably where you're going to
stay because none of us are doing much traveling in
the year ahead because of this Aussie dollar. And that's
what I want to talk to you about today. I
want to read you some headlines, so we've got how
the falling Aussie dollar could hit you hard. Aussie dollar
under pressure, Australian dollar weekends to lowest rates since COVID.
(01:32):
Break this all down for me.
Speaker 1 (01:33):
Yeah, basically, what this is all about is a bit
of a kerfuffle, I guess, regarding exchange rates and the
international economy. And it can get kind of confusing for people,
especially when you see headlines almost suggesting that we should
be panicking about the falling Astround dollar and you think, geez,
do I have to go and buy ken goods again
(01:54):
and go through the whole COVID crisis all over again.
And to be honest, I think it's a little bit overblown.
So let's see if we can sort of work through
what's actually going on here a bit.
Speaker 2 (02:06):
So break down for me what the top line factors
are that would make a currency drop like the Asi
dollar drop over the last couple of months.
Speaker 1 (02:15):
Yeah, I mean, what you have to think about with
the Australian dollar is why are people buying or selling it?
And really the main reason you want to buy Australian
dollars is because you're buying stuff from Australia, or you
think the Australian dollar is a good bet because the
economy is going well and you think that you know
(02:38):
the value of the currency is going to rise. And
while that is a primary factor, the reality is, while
we're a fairly large economy compared to America and China,
we're quite small and when they start sort of mucking about,
we get caught up in the wash. And that's really
what we've seen here because there's a couple of things
(02:59):
at play. One, China's economy is struggling a bit, and
so as a result, they're not buying as much stuff,
or their demand for the stuff that they get from us, mainly,
iron ore isn't as great as it once was, and
sort of the Australian dollar is viewed by investors a
(03:20):
bit of a proxy for the price of iron ore,
and also how well China is doing, because generally we
know if China's doing well, Australia does well. So we've
got that in play. Also, what we've got is America
actually doing kind of okay, which certainly Carmala Harris and
Joe Biden have been trying to tell everyone that actually
(03:41):
the American economy is doing well. That did quite cut
through during the election. But then you also throw in
Donald Trump, and Donald Trump is promising to raise tariffs
on everything coming into America and especially imports from China.
And what that means is everyone's thinking, oh God, China's
(04:02):
already struggling a bit, is this going to hurt China
even more? And basically we've just been caught up in that.
It's got very little to do with Australia. It's all
about China being weak, America kind of attacking China with tariffs,
and we caught up in the wash.
Speaker 2 (04:20):
Why do you think commentators journalists go to that level
of panic language with something like this, what are the
consequences of a week Australian dollar?
Speaker 1 (04:31):
Yeah, it's almost a bit perplexing to me. Well, not perplexing,
given I have worked in media for a long time,
so I know there's always you know, clicks with a
headline that is all scary, scared quotes work well, but
one of the things about an exchange rate is it's
neither good nor bad. Now, certainly if you're thinking of
traveling overseas, it's bad because if you think of it
(04:55):
in dollar terms. Let's think of it.
Speaker 2 (04:58):
You're booking a one hundred dollars a night room at
a hostel in New York. That one hundred dollars is
going to cost you more Ausie dollars.
Speaker 1 (05:04):
Yeah, yeah, So basically, I mean the classic when I
last went over to America a long time ago, in
the winter of two thousand and one, the Aussie dollar
was worth fifty US cents. Basically I was paying double.
If it was one dollar US, that was costing me
two dollars Australian, so very expensive. So when the Aussie
(05:27):
dollar falls, as it kind of has, it's gone from
about sixty five cents to about sixty two US cents,
that means everything is a bit more expensive. So that's
not good for people who are thinking of traveling. But
let's be honest, that's not a big impact on our economy,
and we don't really care if people were going to travel.
(05:48):
We'd actually it'd be better for our economy if they
stayed home and traveled to Queens Stand or wherever where
it really hurts us. Think of it in terms of
us buying stuff. So, yes, that accommodation in America is
now more expensive. But let's say we were instead of
buying a hotel room in America, we're buying, say a book,
(06:10):
or we're buying, say an electric good from America. With
a low or a falling exchange rate, that makes those
imports more expensive. And where we really get hit by
this is, of course, when it comes to petrol prices,
because petrol prices are all imported. Essentially we're importing our
oil and it's all dependent on the world price of oil,
(06:35):
and so when our Australian dollar goes gets weaker, all
other things being equal, we pay more for petrol and
that of course means our inflation generally goes up a bit.
So that certainly hurts us and not a good good
news during a cost of living crisis where we're already
feeling the pinch. And so that's where the main scare
(06:58):
is coming from. And you might think, okay, so it's
all bad news. Well yes and no, because now let's
flip the whole thing.
Speaker 2 (07:05):
Yeah, who benefits who benefits from a weak currency.
Speaker 1 (07:08):
Yeah, let's say you're a company who is exporting to America.
Suddenly it's actually cheaper to buy stuff from Australia. So
if you're exporting, you're actually benefiting from that because your
company's over in America can buy more of your stuff
for basically the same price, and so it actually helps
(07:30):
the economy that way. So we get hurt by higher imports,
we get help by lower prices for our exports. We
still get paid in Australian dollars, so it's all good
for us. So it's very much the swings and roundabouts.
But you know, certainly most of the panic is a
little bit in sort of the Donald Trump joker card
(07:52):
of not really knowing is he going to follow through
and slap a sixty percent tariff on on everything coming
from China. If he does that, that could really wreck
some havoc and we might see the dollar start going
below sixty US cents. But as is always the case
with Donald Trump, who they all knows really what he's
going to do.
Speaker 2 (08:13):
Well, I find it really interesting how in the economy,
and I've kind of picked this up through a couple
of conversations with you over the last year or so,
there tends to be a little bit of speculation being
built into the prices of stuff, So you know, China's
currency might be coming down because of the potential of
Donald Trump being someone in favor of tariffs. Those actually
(08:35):
haven't happened yet, but it's almost like they're getting ready
for that. It's funny how then sometimes it the drop
when he actually does introduce the tariff might not be
as big as we think.
Speaker 1 (08:46):
Yeah, absolutely right, And certainly if he doesn't raise tariffs
to sixty percent, then it actually we might see the
dollar go back up because kind of people go, oh,
it's not as bad as we feared, so it's all good. Yeah,
you very much. Right. A lot of the market investors,
they're all trying to anticipate what's going to happen, because
that's kind of how you make money. You can't make
(09:08):
money investing on things that have happened, because everyone's already
factored that in. And also there's been a lot of
commentary about interest rates. I'm not as convinced by some
who are suggesting that this sort of small fall at
the moment in the Aussie dollar might put off an
interest rate rise I think that would be a little
bit silly on behalf the Reserve bank. It's not going
(09:30):
to have a big impact either way on the value
of the currency. So if the cost of petrol goes
up because of our exchange rate, well, raising interest rates
or keeping interest rates the same isn't going to affect
that all that much. So there's not much they're going
to be able to do to affect the impact. When
we're talking America and China, investors know who's the big
(09:53):
dogs in that game, and it's certainly not Australia.
Speaker 2 (09:56):
Last question for me, Greg, in this journey that you
and I are going on building the economic literacy and
knowledge and understanding how all of this plays into the news,
what's your advice on how closely we should all be
paying attention to currencies? Is it something we should be
checking every week? I mean, is this something that should
be part of our financial diet.
Speaker 1 (10:18):
I would actually say no, not really. I mean, to
be honest, I don't check it a lot. And I
write about this stuff, I mean, and it's always struck
me as a little bit weird that it is in
the news every night. We see the value of the
Aussie dollar and you know, it's important if you are
traveling going to UK at the moment it is basically
(10:38):
you're getting half a dollar, you know, and so that
is I guess important. But if you're not traveling, and
if you're not an importer and exporter, it's kind of
not really all that important. It's not going to have
a major impact unless there is a massive plunge one
way or the other.
Speaker 2 (10:56):
I mean, is massive, like if it gets to fifty
cents or lower.
Speaker 1 (11:00):
Yeah, and you know, if it plunges like five to
ten cents in a week, that's where you start thinking,
oh gosh, there's something wrong afoot and there might have
to be impacts. Some people might be able to recall
about a decade or so when we reach parity with
the US dollar and it was great. Everyone was getting
on Amazon and buying books and shopping and thinking this
(11:22):
is fantastic. Meanwhile, this was horrible for Australia's economy because
our exports, especially manufacturing, really suffered because it was very
expensive to export straying cars and things like that, and
it really hurts. So it's always I think a bit
of a warning not to get too caught up in
the daily movements and think, oh god, it went up
(11:45):
you know, zero point two five percent? Is that? Ma,
Should I get really concerned? I don't think so. I
think worry more about things like, you know, the unemployment
rates and just your own sort of cost of living
and looking at what's happening with petrol prices and interest rates,
rather than the minutia of exchange rates. Unless there is
(12:09):
a real sort of weirdness happening, I don't think people
need to which I'm sure they're not watching the six
pm news. I don't know I've watched it's the six
pm news, But certainly there's no need to be looking
at the currency market fluctuations unless you happen to be
about to go off for a nice holiday.
Speaker 2 (12:28):
Greg Jericho from the Australian Institute, thank you for getting
off the couch and pauson the cricket to have a
chat with me today. Really appreciate you going beyond those
headlines and talking us through what this all means.
Speaker 1 (12:38):
No, is Sam really good to chat.
Speaker 2 (12:41):
It's always such a pleasure to be joined by such
a level headed economic commentator. That's all I've got time
for the Daily OS today, though we'll be back again
with some headlines in the afternoon. Until then, have a
fantastic hump Day and we'll speak to you later. My
name is Lily Madden and I'm a proud Arunda Bunjelung
(13:02):
Calkaton woman from Gadaghl Country. The Daily oz acknowledges that
this podcast is recorded on the lands of the Gadigol
people and pays respect to all Aboriginal and torrest Rate
island and nations.
Speaker 1 (13:13):
We pay our respects to the first peoples of these countries,
both past and present.
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