The Fall of the Aussie Dollar

Posted at 9:30 PM, Tuesday, November 18, 2008

The weekend travel section included a full-page ad of deals for vacations within Australia. "Holiday within Australia this year," the ad urged, "where a dollar is still a dollar." It is reassuring that the Australia dollar is holding its own here in Australia, because it sure isn't standing up in most of the rest of the world. For a magical period which lasted for many months, the Australian dollar and the American dollar were virtually equal in value. It was a beautiful time that we came to expect would last for ever. But it didn't. As the American stock market began its catastrophic nose dive in September, our colorful dollar started a slide into the abyss. Today, the Aussie dollar is worth a pathetic sixty-five American cents and an even more pathetic fifty-one Euros.

Practically, the impact both on Australia as a whole and on our family has been quite dramatic. Just about everything that isn't imported from China costs more. A recent segment on ABC Radio National focussed on a talent agency which brings performers to Australia and pays them in American dollars. If the agency promised US$50,000 to a performer when the two dollars were par, it now has to fork over a hefty AU$77,000. Of course, that's just a small example, but you can imagine where it leads. Another example: each year, hundreds of committed Jewish students go to Israel following high school graduated to do a gap year of study and servicel. Thanks to a surprisingly-strong shekel, tuition for that program has DOUBLED from $16,000 to $30,000, which makes it highly probable that some very promising young Jewish leaders will end up stuck in Australia next year. As for us, we continue to make payments in American dollars on life and disability insurance policies, plus a stray student loan. Suddenly, the bill has gone way up.

We are left scratching our heads as to why this is happening. Here are some quick facts about the current state of the economy in Australia: a) While it is true that the Australian stock market has had a terrible year, this economy is not in recession, and there is a very good chance it will not slide into recession. It is estimated to grow at a slow rate of 1 1/2% next year, but that's still growth. b) Although they're being pinched for sure, not a single Australian bank has failed. c) The Australian government has been sitting on a surplus of at least $20 billion, which it is now spending to ward off economic dangers. In addition to passing out $10 billion in cash to pensioners, care providers, and poor families, it has just announced $200 million in grants to cities and towns for local improvement and development projects which will create jobs and bolster local economies.

The reward to a government which appears to be doing everything it's supposed to is, apparently, to see its currency become increasingly worthless when compared with money from the flourishing economies of America and Europe. Go figure. Several months back, as the dollar was starting its decline, I cornered a member of my congregation who is an investment advisor. I asked her how the Australian dollar could possibly be falling so fast against the American dollar, when it was the American economy which was declining so precipitously. Answer: I don't know, and it doesn't make sense. So much for economics.

The only good news to come out of this is that, suddenly, people we love are considering trips to visit us. After all, you can come to Australia and feel rich!