Crikey: Day 5 Part II

20. Wine producers rue our dollar, and will students stay away?

Crikey intern Jane Vashti Ryan writes:

As Australian Institute of Export director Peter Mace put it: "It’s not bloody good." The Australian dollar peaked at 99.2 US cents overnight, the highest it has been since the dollar was floated in 1983. And while Australian travellers are cheering, exporters and educators are bracing for significant fallout. Mace says the wine industry, the education sector and the manufacturing sector will all suffer if this hike is here to stay. "The Australian wine industry has little room to move on pricing with competition now coming from South America and South Africa, and manufacturing will suffer too. We’re a high-cost production country." But the real doozie, according to Mace, will be the fallout for the education sector, one of Australia’s biggest export industries: "With the rising dollar, foreign students have to make the call on whether to come to Australia or look else where." International student housing group International House director Elissa Jans is worried about the ramifications. "Last time the dollar peaked, we had feedback from overseas clients saying the rising value of the dollar really was a serious deterrent," she said. "Students are looking for a bargain when they come and study. Normally they look at the UK or the US but they come here because it’s cheap. When the dollar rises this high they might as well stay at home." Chief economist at the Export Finance and Insurance Corporation Roger Donnelly agrees certain industries will be adversely affected, but points out that rising currency value is a response to a potentially overheating economy. "It’s a safety valve for inflation and the RBA would have to be taking sterner action if we had inflation," he said. The dollar has been boosted by strong unemployment figures and a weakening American dollar, but the threat of an international currency war looms large with fears that major economies are engaging in a "race to the bottom" in a bid to boost export growth. But you could have read it here first...