Page 56 JUNE 5 2011 JUNE 5 2011 Page 57 ST 56 AGENDA 57 AGENDA Profits of gloom as dollar booms Industry bearing the brunt From Page 55 ‘‘The value of the dollar is keeping our traditional market of Europe and America away. . . while driving Aust- ralians off to exotic destinations,’’ he said. ‘‘When your budget gets blown out by 20 per cent and you are a budget traveller, (holidaying in Australia) is a big decision. ‘‘You are not going to stay as long, and you are not going to spend as much.’’ Tourism Whitsundays CEO Peter O’Reilly said international tourists now had half the money to spend on trips Down Under and were voting with their feet. The decline in the backpacking market had been the most noticeable, which Mr O’Reilly linked to a drop in international students. There are currently 41,500 less international students studying in Australia, compared with this time last year, according to Federal Govern- ment figures. International student ambassador for Brisbane Matthew Ram arrived in Queensland to study medicine on a US scholarship two years ago. But he is now considering leaving for home halfway through the course due to the higher cost of living under the current exchange rate. He said two years ago, his $US50,000-a-year scholarship covered tuition and cost of living, but now barely covered his tuition, forcing him to take out a US loan. ‘‘If I finish my education here I am looking at going into debt. I am at $20,000 (debt) now, but it could be closer to $100,000 by the time I’m done,’’ he said. Queensland’s film industry has also taken a battering, with some Indian film producers now opting for cheaper locations. Two years after attracting the big- budget Narnia film, the location is no longer proving as attractive for over- seas productions. Gold Coast visual effects company SMI Photon blamed the strong dollar for a decision to move its primary business to China about a year ago. ‘‘The Australian dollar is virtually at parity with the US dollar . . . and looking like it will stay high for a long time ahead,’’ Photon chief executive Dale Duguid said in a statement explaining the decision. For exporters, the exchange rate has frozen any expansion plans. Two years ago, medical equipment manufacturer Cook Asia Pacific in- vested in a new $A30 million manu- facturing facility in Brisbane. Finance director Mark Muller said that equated to a cost of $US23 million for its parent company, global com- pany Cook Medical. ‘‘If we would actually do that now it would be $32 million and in a market where the profit’s just not the same as two years ago,’’ Mr Muller said. ‘‘The cost of our labour in world terms has gone up 50 per cent in two years,’’ he said. ‘‘If we were trying to do that investment now, we may not get the same decision.’’ ‘‘There is not a lot of incentive right now to increase manufacturing out of Australia.’’ Mr Muller said the soaring cost of power and water and lack of govern- ment funding for clinical trials to bring new products to market were part of the problem. Queensland Treasurer Andrew Fraser said a massive drop in exports had been most prevalent in the resources sector, with hard coking coal exports falling by $1.8 billion over the March quarter. [email protected] SUGAR EVERY time the Australian currency rises in value against its US counterpart, Queensland canegrowers can kiss goodbye to millions of dollars in earnings. The soaring Aussie dollar has proven to be the achilles heel for cane farmers, who are now earning a sweet $450 a tonne for exported raw sugar. The world sugar trade operates in US dollars, meaning that as the Australian dollar rises, the return to Queensland farmers declines. Queensland Canegrowers chief executive Steve Greenwood said the Aussie strong dollar was a huge dampener for an otherwise strong industry. ‘‘For every cent increase in the dollar, at the moment we are seeing a reduction of $4.50 per tonne of sugar,’’ Mr Greenwood said. TOURISM THE SUN is shining and skies a clear blue, but tourism operators in the Whitsundays are desperately awaiting the usual rush of tourists. Tourism providers on the doorstep to the Great Barrier Reef say not only has the strong dollar made the destination less attractive for overseas visitors from the United Kingdom and the US, it was also sending droves of domestic holidayers to cheaper locations overseas, such as Bali. This time last year, Whitsunday Sailing Adventures marketing director Gabby Shaw said half the number of seats on their sailing boats would be booked two weeks out from departure date. But today, those same boats, which take groups of up to 25 people, are empty two to three days out from departure date. Ms Shaw said regular bookings of their sailing trips by international students had also dried up. She said price-cutting in the industry had added to the damage. ‘‘Just in the last two days we have had to lay off our rep down in Sydney,’’ she said. STUDENTS WHEN University of Queensland business student Mowd Hassan chose to study in Australia two years ago, affordability was a key part of the decision. Compared with other study destinations of a similarly high standard, Australia was the less expensive option. But today’s less favourable exchange rate has taken its toll on Mr Hassan, whose parents are now having to send more money to cover his living costs than when he began his studies last year. ‘‘It has increased tremendously,’’ he said. ‘‘My parents have to send me 900 ringgit ($247) just to get (text) books. ‘‘It has been a taxing time for me in terms of my study and cost of living over here. I think it is really expensive here.’’ Mr Hassan, who is on a Malaysian government scholarship, shares a house in the university suburb of St Lucia with six other people. This year the rent increased by $50. He said the rising cost of fruit and vegetables had also made it harder to make ends meet. RETAIL AS MAJOR retailers reel from a surge in online shopping fuelled by the strong Aussie dollar, some small retailers say it is not all bad news. Creator of Queensland children’s designer clothing brand Tilly & Otto, Kavala Williams said a strong dollar had cut her production costs. Mrs Williams (pictured), based in the southeast Queensland seaside suburb of Redcliffe, said the cost of importing fabric from the US for her children’s line had been slashed by 20 per cent compared with last year due to the dollar. ‘‘That is definitely a positive for me because I import all my fabrics from the US. The strength of our dollar has certainly lowered my production costs,’’ she said. She was already making savings by importing all her fabrics at a third of the local price and by selling online. FILM TWO years after luring the $150 million Narnia blockbuster to our shores, big-budget film producers are far from beating down the door. The embattled Queensland film industry is struggling to attract big films, with Gold Coast-based production company boss George Vasiliadas saying there is a low chance of repeating the success soon with the dollar so strong. ‘‘With the big-budget films, I can’t see them coming in a hurry,’’ he said. ‘‘A lot of these offshore productions will have two to three countries as an option where they’d like to film.’’ EXPORT FOR Brisbane manufacturer Allan Morrison, managing director of BSD Robotics, a surging dollar can only bring bad news. With 98 per cent of goods produced at BSD Robotic’s Acacia Ridge factory exported, a slight increase in the dollar creates a huge impact on its international competitiveness. A few months ago the company, which manufactures laboratory instruments, was forced to offer prices to distributors in Australian dollars rather than US dollars, as a buffer against an unfavourable exchange rate. This meant passing on some of the pain to distributors and customers. ‘‘There is absolutely no doubt that it has been a problem,’’ Mr Morrison said. COMMENT Terry McCrann Battling a two-speed economy OUR dollar is headed higher. Only another shock global meltdown will stop it. It will certainly go through the $US1.10 it just failed to reach a few weeks ago. At some point it will probably hit $US1.20. Indeed, if the China boom continues, it could quite possibly reach the all-time record just shy of $US1.50 of the early 1970s. And in future it could come right back to parity with the greenback. That’s what a floating currency does and will ‘‘do more of’’ in an increa- singly volatile world. Indeed, it was only US63¢ barely two years ago, after being almost at parity the year before. So is it just a case of riding out the high dollar for our manufacturers, tourism operators and the like? For some, yes; for many, no. This time, it really is different. The production lines that are closed down won’t be re-opened with a lower dollar. They will have disappeared to China and into history. But the foreign tourists will come back with a lower dollar and the growing prosperity in Asia creating more of them. Our wine, education and similar industries sit somewhere in the middle. If they can ride out the high dollar, they can prosper when and if a lower dollar returns. Indeed, those that really add value will survive even in a permanently high-dollar world. But it will be much tougher and demand real value to foreign customers. That’s one of the three things that make this high-dollar future different. We have never had a mining boom as big – creating a dramatic, permanent ‘‘two-speed economy’’. The second is the internet. Consumers here can access cheap foreign prices directly, bypassing local retailers. The third is the decline of the US and ultimately also the mighty greenback. We don’t want to sink with it.