Falling dollar boosts Australian business

Australia's falling currency is starting to provide a boost to its companies, particularly exporters.

The falling Aussie dollar is starting to have an impact on the Australian economy, giving company revenues a boost.

The days of the Australian currency being stronger than the US dollar are well and truly over after it fell below US$1 in May and reached 86.43 US cents early in October, its lowest point for 2014.

A lower exchange rate helps to make Australian exports cheaper and increases the competitiveness of locally-made goods with imported products.

Commonwealth Bank economist Diana Mousina said the Australian dollar's 10 per cent fall alone would boost economic growth up to one per cent over the next two years.

"Businesses with a high export propensity or high import penetration will benefit the most," she said.

"The main winners from a lower currency, from an income sense, will be company profits and government tax revenues."

It is also one of the reasons why the CBA recently moved its forecast for a Reserve Bank interest rate hike from February to August.

Mousina said the lower exchange rate was starting to act as a buffer to the fall in the prices of our mining and resource exports.

"Our commodity prices index has fallen by nine per cent over the past three months in US dollar terms, but is only two per cent lower in Australian dollar terms," she said.

JP Morgan economist Tom Kennedy said the weaker Aussie dollar helped but was only the first piece in the puzzle to help the sluggish retail sector.

"While a weaker Australian dollar improves domestic retailers' competitiveness, we think the currency's recent declines are far from a game-changer for the embattled sector," he said.

"We view modest wage growth, weak consumer confidence, and elevated unemployment as the major constraints to any sustained pick-up in household spending."

The Aussie dollar's recent fall was mainly due to the US dollar getting a boost from an improving American economy and that the US Federal Reserve was considering its first interest rate hike in nine years.

Further indications on the timing of the Fed's rate rise are expected the central bank's boss Janet Yellen holds a press conference early on Thursday morning, Australian time, after its regular policy meeting.

LTG GoldRock director Andrew Barnett is confident the Australian dollar will stay around its current levels or even go a little lower this year because the US rate hike is inevitable.

"She realises that she's going to have to raise rates at some point next year if the current economic trends continue.

"I think the smart money will speculate on higher rates and push that US dollar higher," he said.