The climbing dollar has been a boon for online shoppers and holidays. Picture:
With a rising Aussie dollar and recent predictions it could hit $US1.70 in three years it’s time to look at how this could affect our lives as property investors.
The dollar, which peaked at a record $US1.10 a while ago has been a boon for shoppers by making imports cheaper, slashing the cost of overseas holidays and keeping inflation down in the process.
But what would happen if it keeps on climbing, reaching $US1.30 by 2013 and $US1.70 by 2014 as suggested by a leading expert Dr Savvas Savouri, head of Toscafund hedge fund.
He suggested that the huge demand for Aussie resources in China and India was fuelling the dollar’s record run.
ANZ’s chief executive Mike Smith agreed. He was reported in The Australian as saying “I can’t see that there is anything to knock it off its perch because it’s not only the strong Australian dollar, it’s also the weak US dollar.”
“And when you think about what is happening in the US, I can’t see them increasing rates for at least 18 months and that will have an impact” said Smith.
So what are the effects of a booming Aussie dollar?
Interest rates: The high dollar is likely to hold back inflation which may restrict the Reserve Bank to only one interest rate rise this year.
Hospitality: Aussies can now buy more with their money overseas and this means we’re more likely to travel abroad. It also means fewer overseas tourists coming to Australia
Shopping: A higher dollar makes imports cheaper – good news for shoppers!
Petrol prices: a high dollar should shield motorists from rising petrol prices.
All in all a rising dollar is good news for property investors.
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