Happy Friday to everyone except those of you that have panic-purchased toilet paper this week and caused Woolies to put a cap on the number of rolls we can buy. No seriously, apparently someone pulled a knife in the toilet paper aisle? My poor Grandma went to her local Coles and was greeted with nothing but tumbleweed when she searched for some Quilton. Crazy times.
The root of this toilet paper crisis is none other than Coronavirus, which is impacting not only the value of the Aussie dollar but global economies as a whole. With this in mind, today, one Aussie dollar will buy you:
Fluctuating exchange rates stressing you out? Stress less. Add Rate Move Guarantee to your purchase of foreign currency in-store. If the rate improves within 14 days, we will refund you the difference. Chances are the shopping centre toilets will have plenty of toilet paper too.
What impacted the Aussie dollar this week?
A few key things:
- Coronavirus concerns continue to dampen market risk-appetite, thus putting downward pressure on the value of the AUD
- The Reserve Bank of Australia cut interest rates to a record low of 0.5%
- The USA election process continues to tick along, with several key contenders dropping out after ‘Super Tuesday’
The election has yet to have a significant effect on the value of the USD against the AUD; however, it is worth keeping an eye on if you plan on travelling to the USA in the next 12 months. At this stage, though, COVID-19 is the most prominent force dictating foreign currency movements.
To understand why the Australian economy and dollar is feeling the pressure of the virus so much, it’s essential to recognise where we sit in the grand economic scheme of things. Our economy is very closely linked to China as they are one of our biggest export partners. Two of those exports are education (Chinese students coming to Aus to study) and tourism. Travel bans on Chinese citizens entering Australia have been in effect for over a month now. This means there are fewer people in Australia spending money and helping the economy.
Secondly, the Aussie dollar thrives in ‘risk-on’ markets. In other words, when investors are concerned about the level of risk in global markets, they will stop purchasing the AUD and instead flock to ‘safe-haven’ currencies like the Japanese yen. This is evident right now, as the value of the JPY has increased slightly alongside the demand.
Finally, increased (and some would argue slightly over the top) media coverage of the virus has led to panic in Australia. Panic means people will spend less, preferring to save their money and weather out the storm. Unless they’re buying toilet paper apparently. Who knew.
The Australian government is currently planning a stimulus package to encourage Aussie’s to spend more and help prevent a recession. The RBA estimated that the virus has hindered economic growth in January and February by 0.5 of a percentage point already. Hence, a stimulus package is definitely a necessary step to ensure our economy comes out the other side intact. At this stage, it seems the package will primarily include tax relief measures.
A stimulus package has been a long time coming in the eyes of the RBA though, especially after they cut interest rates further on Tuesday to a record low of 0.5%. At this point, further interest rate cuts aren’t really gonna do much when it comes to stimulating Aussie spending unless the government chips in with some fiscal policy. Should the situation continue to sour, the RBA is looking down the barrel of 0.25% interest rates and the potential of quantitative easing. This is the process of increasing the money supply (printing more money than usual) to artificially cause inflation in the hope of stimulating the economy. This is a controversial move; however, the RBA is considering all options at this point in time.
What does this mean for Aussie travellers?
While the virus has undoubtedly put a spanner in the works, it doesn’t mean you have to cancel your travel plans and lock yourself in a toilet paper fortified dungeon.
Instead, look to travel to countries in the South Pacific, UK or the USA where the virus has yet to reach or is less pronounced. Chances are tourist hot spots are a lot less crowded than usual, so it’s the perfect time to explore yourself.
Alternatively, consider a domestic holiday, particularly to areas in southern NSW, Victoria and South Australia that were hit by the bushfires. That way you can have an epic holiday and know your tourist dollars are helping business’ down there rebuild after the fires.
When it comes to foreign currency, there really is no way of knowing what markets and the value of the AUD will do (if you do know, can you please let us know?). What we do know is the following:
- You can sign up to rate alerts, and we’ll let you know when the AUD hits a high against your preferred currency
- It’s worth adding Rate Move Guarantee to your purchase in-store
- You can lock in a great exchange rate with your Travel Money Oz Currency Pass
For travel advice, we recommend speaking to your local travel agent and keeping an eye on Smart Traveller. For anything currency-related, you’re always welcome to swing by any of our stores and chat to our travel money experts.
Finally, the country isn’t going to run out of toilet paper. Please stop filling your trolleys so that my poor Grandma can get her hands on a roll or two.
This blog is provided for information only and does not take into consideration your objectives, financial situation or needs. You should consider whether the information and suggestions contained in any blog entry are appropriate for you, having regard to your own objectives, financial situation and needs. While we take reasonable care in providing the blog, we give no warranties or representations that it is complete or accurate, or is appropriate for you. We are not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information and/or suggestions contained in this blog. All rates are quoted from the Travel Money Oz website and are valid as of March 6th 2020. Terms and conditions apply to Rate Move Guarantee.