Young backpackers traveling abroad are suffering the most from the weak Australian dollar – amid fears it will fall below 60 cents by the end of the year.
In just one month, the local currency has lost 7.3 percent of its value, falling from 68.89 cents on July 14 to a ten-month low of 63.85 cents on August 17..
Although the currency has recovered slightly to 64.5 cents, it is still well below the February 71.5 cents level.
Millennials those hoping to travel abroad soon will be most likely to suffer from a weaker Australian dollar.
That is because currency fluctuations are immediately reflected in the currency markets.
The pain is felt immediately when money changers give travelers back US dollars in exchange for Australian notes.
The Australian dollar has also weakened against the British pound in recent weeks, making holidays more expensive in Britain as well.
It’s now worth just over half a pound or 51 pence, compared to 53.95 pence in June.
There is also bad news for European travellers: the Australian dollar has fallen to EUR 0.5956, down from EUR 0.6117 in July.
Young backpackers looking to travel abroad soon suffer the most from the weak Australian dollar (pictured shows Australians having fun in London)
Goods bought online abroad are also becoming more expensive, but it takes time for the prices of things like cars and plasma TVs to rise, as these items are ordered in bulk months in advance, often in US dollars. That means wealthy baby boomers (such as retired firefighter Chris) are less affected by a weaker Australian dollar
Jessica Amir, a market strategist at trading platform Moomoo, said the Australian dollar was likely to weaken until China launched a new stimulus package that would boost demand for Australian iron ore, the raw material used to make steel.
“It’s probably a good time to rethink your trip to the United States,” she told Daily Mail Australia.
“They’re going to lose quite a bit of money on the conversion.
“It’s just a matter of falling commodity prices as we wait for stimulus from China. The economic figures from China are really disappointing.
Does that really matter to the average 21 or 25 year old who wants to travel? No. Would they care? Probably not.’
Goods bought online abroad are also becoming more expensive, but it takes time for the prices of things like cars and plasma TVs to rise, as these items are ordered in bulk months in advance, often in US dollars.
That means wealthy baby boomers, who are likely to be able to afford expensive imported goods, will be less affected by a weaker Australian dollar.
Westpac expects the Australian dollar to fall to 62 cents by the end of September, which would place the currency at its lowest point since April 2020, right at the start of the pandemic lockdowns.
But David Llewellyn-Smith, the chief strategist of MB Super and Nucleus Wealthexpects the rate to fall to 59 cents by Christmas, falling to a level not seen since March 2020.
He expects it to fall to 40 cents in five to 10 years due to a longer-term Chinese economic slowdown that has exposed problems with the glut of residential towers, leading Evergrande to file for bankruptcy in the US.
This would be a new all-time low since the Australian dollar floated on the stock exchange in December 1983 and would fall below the basement level of 47.78 US cents reached in April 2001 after the US technology crash.
Inflation was six percent at the time, but that was because the goods and services tax, introduced in July 2000, artificially inflated prices.
In just one month, the local currency has lost 7.3 percent of its value, falling from 68.89 cents on July 14 to a ten-month low of 63.85 cents on August 17 (pictured is a stock photo)
Jessica Amir, a market strategist at trading platform Moomoo, said the Australian dollar is likely to weaken until China launches a new stimulus package that would boost demand for Australian iron ore, the raw material used to make steel.
A 7.2 percent fall in the Australian dollar over the past year has not translated into more expensive petrol. New inflation data shows that fuel prices fell 7.6 percent in the year to July.
But that’s little comfort to motorists in parts of Sydney, who are still paying $2 a liter this week for unleaded E10 petrol, the cheapest variety, MotorMouth data shows.
The wide differential between Australian and US interest rates has weakened the Australian dollar since mid-2022, preventing it from staying above 70 cents for long.
The Reserve Bank of Australia’s 11-year high cash rate of 4.1 percent was still much lower than the US Federal Reserve’s equivalent federal funds rate of 5.25 to 5.5 percent, which is at its highest level in 22 years stands.