Four ways a lower Aussie dollar will make your life better

THE glorious days of the Aussie dollar being worth more than the US dollar are long gone. It sounds like a bad thing, but there are some surprising upsides.

Elderton Wines

THE Australian dollar has fallen a lot. It’s now at under US74c. Remember when it was worth more than one US dollar? Those glorious days are long gone, friend.

Sounds bad? That’s not all. The Australian dollar has fallen hard and fast against most currencies in the world.

The Australian dollar has plummeted in the last 18 months.

But there’s always an upside. And since there’s nothing we can do about the currency, focusing on the upsides is the smartest play we’ve got.

Here are four ways a lower Aussie dollar will make your life better.

1. A payrise

A lower dollar could mean more dough in your pocket. Here’s how it works.

When the dollar was high and you went to the shops, imports — like Italian tomatoes — were cheaper. Soon, Aussie tomatoes will look like the better deal. (If you feel good about buying Australian-made goods, there’s a bonus right there.)

At the same time, Australian-made exports become cheaper globally. When an Italian goes to their supermarket, they also notice Australian tomatoes are cheaper. Belissimo!

Australian companies sell more, here and overseas. A version of this happens in every industry, not just tomato growers. So they hire more people, to make hay while the sun shines.

This slowly eats away at the unemployment rate (currently 5.9 per cent). Once the unemployment rate falls, wage rises should be hot on its heels.

A lower dollar is exactly how the Americans caused their economy to turn around so quickly. They had 10 per cent unemployment six years ago. It’s now 5 per cent. They did that by devaluing the mighty US dollar.

US unemployment figures since 2010.

This won’t happen overnight. And if you have a taste for imports or overseas holidays, you might still be worse off. But you could end up with a payrise.

And that’s not the only benefit. Here are three more.

2. Smaller budget deficit

When the dollar is lower, businesses make more profit and more people have jobs. That means more tax revenue for the government.

The good news? A smaller budget deficit means less chance of a sneaky tax hike. And nobody enjoys a sneaky tax hike.

3. You can rent out your spare room

There’s going to be an avalanche of inbound tourism. We’re already seeing a flood, but that’s about to intensify.

The number of foreign tourists visiting Australia has dramatically increased since 2010.

Australia is a luxury item on most people’s travel wishlist. But with the lower dollar, Australia has become a Mercedes at a Hyundai price. Germans, Americans, and most of all Chinese are going to be coming here in droves.

You can benefit from this directly. Put a spare bedroom on Airbnb and watch the cash flow in.

4. The Barossa, etc

The flip side of the flood of inbound tourists is that it’s about to get more expensive to go overseas. That trip to the UK you’ve been dreaming of? It’s going to cost 50 per cent more than three years ago.

Instead, this is your chance to see Australia. If you haven’t seen the Great Barrier Reef this is your moment. If you’ve never been to the red centre, go. If you’re interested in shiraz, head to the Barossa.

And as you’re standing between the vines in that particularly lovely part of South Australia, sipping from an enormous glass with the sun on your back, give a moment’s though to international currency markets and remember that a lower dollar is not all bad news.

Cheers to that! Photo: David Cronin.

Jason Murphy is an economist. He publishes the blog Thomas The Think Engine. Follow him on Twitter @jasemurphy.