Even a forecast return of the Australian Dollar to US 70 cents may not be enough for the country to return to competitiveness, says BIS Shrapnel in its latest economic outlook report.
The forecasters say the mining boom drove a rise in the dollar which destroyed the competitiveness of Australian export and import-competing industries.
And while a lower dollar is now starting to benefit those industries, Australia remains uncompetitive, as this chart of unit labour costs in Australia (a measure of competitiveness) compared to other countries shows:
That shows Australia’s relative position in Australian dollars. It looks worse in US dollars, as this chart shows:
BIS Shrapnel Chief Economist Frank Gelber says he expects the dollar to fall further.
“But even $US0.70 won’t be enough. At $US0.70 some industries will be competitive, notably tourism and education services. But others will need an even lower dollar to be competitive.”