Having a highly valued currency seems like a good thing on the surface, but there are actually downsides to it, and Australia is experiencing them all. Whilst there are certainly many benefits that Australia is now able to enjoy, the highly valued currency impacts trade, and much more.
This article considers some of the impacts that a highly valued currency can have on an economy.
The trade of goods is hugely affected by the value of a currency. When exporting goods, it has an impact of significant proportions, because the buyers may not be able to afford the costs. With a highly valued currency, you will have to pay your staff more to produce something, pay extrafor transport costs, and consequentially charge more to your customers. If your customers can no longer afford to pay your costs,because of the exchange rate,then trade falls down and the economy begins to falter.
Stock and share trading is always a significant element of any country within the global economy, but as the value of a currency increases, so too do trading opportunities. Individual investment success is more easily realised when trading with a highly valued currency. This is simply because you can buy more for the value and obtain a greater return for your investment.
Many Australians are currently undertaking forex training, and other online trading courses, to understand how best they can tap into this market. With a highly valued currency, trading is very attractive, because shares can be bought for what is a relatively low price. This ability to trade internationally, however, once again moves money out of the nation and spreads the wealth around the world through international investments.
Travel to Australia is a huge source of income for the country. Visitors bring in vast amounts of revenue, and many businesses in the country rely entirely on this income to survive. With an increase in currency value, however, the travel to a country will invariably drop, as less people will be able to afford to make the expense.
The travel of Australians within Australia is also another huge source of income for the country. Interstate travel in Australia is, in many ways, like travelling to another country within Europe, because Australia is so large and so vast. However, this is remarkably less attractive when the currency is very highly valued, because travel overseas is much cheaper to achieve.
As a currency increases in value, more citizens will travel abroad, and more money will be taken away from the country. The impact of travel, when a currency increases in value, is huge, particularly in countries that rely heavily on tourism for income.
The key issue that economies face as they begin to increase the value of their currencies is one of monetary export. Whether through investment opportunities or through holidays abroad, countries with a highly valued currency tend to begin to lose wealth viamonetary export. If all citizens spend a large portion of their new wealth overseas, then this will simply weaken the economy. Trade and tourism will also drop with an increased currency value, and this joint loss of income and increased international expenditure can have a profound effect.