While consumers love a strong Australian dollar, manufacturers like Holden loathe it.
The Australian dollar has this year retreated from parity with the US greenback, but it’s still historically high.
For ordinary consumers, a stronger currency means cheaper overseas holidays and imported smartphones.
But for manufacturers like Holden, it means more intense competition from a wider array of imported cars in the Australian market.
This has seen demand drop for the Australian-made Holden Commodore and Cruze, in favour of Japanese, Korean and Thai-built models.
A higher Australian dollar also makes it harder for local makers to export their products at competitive prices – with the US and the Middle East key markets for Holden cars.
It’s little surprise, then, that General Motors has blamed the high Australian dollar for its decision to end local car making by the end of 2017 – almost 70 years after the first Holden rolled off the production line.
“The decision to end manufacturing in Australia reflects the perfect storm of negative influences the automotive industry faces in the country, including the sustained strength of the Australian dollar, high cost of production, small domestic market and arguably the most competitive and fragmented auto market in the world,” the American auto giant’s chairman and chief executive Dan Akerson said in a statement.
The Australian dollar has fallen from 97 US cents to levels closer to 91 US cents since late October.
But the currency is still well above the 75 US cent average since the currency was floated in December 1983, JP Morgan economist Tom Kennedy said.
“At least for the past few years … the Australian dollar’s been tracking well above the historical average and, as a consequence, that’s exposing a lot of Australia’s trade-exposed sectors, like your manufacturers, retailers and wholesalers … to a higher degree of foreign competition.”