A Potential Drop in The AUD Will Be Good News For Exporters

by Dominique Schuh

The Australian share market failed to follow US stocks higher as Aussie wage growth slumped to a record low and iron ore prices and the Chinese yuan were hammered. The US S&P 500 index gained 0.7 percent last night, but after opening 0.4 percent up, the S&P ASX200 index dropped into the red and closed up 1.5 points at 5327.7. The Australian dollar is broadly flat following strong US retail sales figures for October, adding further weight to the likelihood of a Federal Reserve rate rise in December.

What this means for you:

If US interest rates start rising from their current low levels, there's a strong chance that the Australian dollar will drop. This is bad news if you're planning an overseas trip to the US any time soon, but it's good news for Australian exporters. A lower Australian dollar is more attractive to overseas buyers of our goods.

The Reserve Bank of Australia has signalled a warning about the high levels of household debt in this country, saying that if the global economy takes a turn for the worst, we could find ourselves being over borrowed. Take control of your debt by making extra repayments where you can, and on a more frequent basis. Most borrowing arrangements have the interest compounding daily, so reduce the number of days the higher debt is compounding by paying more frequently. You'd be surprised at how much interest you'll save.