Australia is currently waiting to see the full effects of Brexit and Trump on the Australian dollar and the economy.
How do you plan ahead and know what to do?
The full effects of Brexit are yet to be felt, as the UK is currently negotiating with Australia for its own trade agreement, as is the EU. Predictions are, that this will impact commodity exports from Australia to the UK and Europe.
The effect of Brexit will not be felt in our industry as much as the latest movements in America.
Since the inauguration of President Trump, the AUD has increased to 75 cents against the USD as Americans wait to see if Trump fires up the economy.
The nervousness for us and our suppliers is the Chinese element. It is predicted that the USA will put a 45% tariff on goods imported from China, this, in turn, could slow China’s economy as it increases the cost of goods coming into in America along with the additional 45% tariff.
The question then is, how and will that affect Australian companies that import American brands which are manufactured in China? We don’t know the answer to this and the world is waiting to see what happens and if this is viable or not for America.
The flip side to this is, as the AUD increases, companies that directly import goods from China, where the currency is pegged to the US dollar, will be affected by the local currency’s upward moves.
How can you protect your business? Good financial advice is important and they may recommend a Forward exchange contract. This protects you from adverse movements in exchange rates by locking in an agreed exchange rate until an agreed date.