A recent survey has reported that a surprising proportion of Australians don’t understand how movements of the Australian dollar impact them personally or how they affect the economy. Notably ninety-one (91) per cent don’t know what an exchange rate is, believe overseas goods and services are cheaper when the Australian dollar is lower, or believe Australian goods are cheaper for US tourists in times when the Australian dollar is higher against the US dollar.
What were the findings of the survey?
These findings from the research report were derived from a survey of an independent panel of 1002 Australians, commissioned by Money Transfer Comparison, a global comparison service that helps Australians source the best exchange rates in international money transfers.
The rising cost of living emerged as a significant issue in 2022, with consistent interest rate rises occurring from May, an inflation rate that rose to 7.3 per cent by November and a very volatile Australian share market that caused uncertainty over investments all over the country.
The Australian dollar has also fluctuated throughout the year in 2022, peaking in early April to $0.76 on the US dollar, before falling to USD $0.62 in October 2022 – its biggest fall since April 2020. While it rose to USD $0.68 in November, now by January this year the dollar sits at just USD $0.70. The Australian dollar also remains low against other currencies around the world: for example currently $0.57 against the British pound and $0.64 against the Euro.
In the survey, respondents were presented with four statements about the Australian dollar and were asked to identify those they believed were true or false. Majority were incorrect.
Are Aussie goods and services cheaper for US tourists?
Surprisingly, nearly two-thirds (65 per cent) of the respondents believed the above statement was true. On the contrary, goods in Australia become more expensive for Americans when our dollar goes up in value against the USD. Similar proportions of respondents across different ages and States struggled to determine whether the above statement was true or false.
Over-50s respondents of the survey, by a small margin, could correctly identify the above statement as false, at 39 per cent, followed by 36 per cent of 25-54-year-olds and just 26 per cent of under-35s. Similarly, just over a third (37 per cent) of respondents from Queensland could correctly identify the statement as false, followed closely by 36 per cent of Victorians, 35 per cent of NSW respondents and 34 per cent of South Australians and West Australians.
When AUD value drops are US products cheaper?
More than half (58 per cent) of the Money Transfer Comparison survey respondents believed that the above statement was true. In fact, a lower Australian dollar makes overseas purchases in USD more expensive for Australians, as it is more expensive for Australians to exchange their funds to the US dollar. When the Australian dollar is higher against the US dollar, tourists from the US or those living in the US will pay more for goods purchased within Australia.
Is exchange rate charged on every overseas purchase?
Nearly two-thirds (65 per cent) of the respondents believed the above statement is true. The exchange rate refers to the difference in value between two currencies, such as the Australian dollar and the US dollar. For instance, under the current prevailing exchange rate of $0.70 USD, Australians will unfortunately be paying more to receive less US dollars in return.
Having said that, fees by banks are involved in international purchases and money transfers. In addition to the exchange rate, banks will by standard charge an international transaction fee, which is incurred on all overseas purchases and international money transfers. This fee averages at approximately 3 per cent of the sale price of an item, which can become costly for Australians who regularly shop or make overseas payments or money transfers for eg. travel.
When AUD rises against USD do export prices go up?
A quarter (26 per cent) of the Money Transfer Comparison survey respondents genuinely believed this true statement was false. Overall, a third (33 per cent) of the respondents incorrectly indicated that all the four statements were true, despite only the above statement being correct. Ninety-one (91) per cent got at least one of these statements wrong.
Alon Rajic, Founder and Managing Director of Money Transfer Comparison, says: “It is concerning to see that Australians generally lack fundamental knowledge on the Australian dollar, its movements and its impact on the economy as well as on consumer spending. The ongoing fluctuations of the Australian dollar are likely to continue well into this year, with forecasts of only a slight increase in the Australian dollar to USD $0.72 by June this year.”
“However, the Australian dollar movements will most likely be unpredictable, given the current climate and a projected economic downturn.” he further added. Despite the high costs of living in the country, four in five (4 in 5) Australians are also still planning to travel this year, with more than a third (37 per cent) intending to travel widely overseas all through 2023.
Alon adds: “Given the low value of the dollar, coupled with inflation, Australians will need to be prepared to spend more on goods purchased from the US this year. It would be wise to ensure they are well versed in the AUD to avoid paying more than necessary when travelling, particularly during the current tough climate of high costs. Keeping an eye on exchange rates, and timing transfers of funds, will be especially important when sending money this year.”