Rocketing Aussie dollar sparks calls for energy bill cuts

THE heat is on the state and federal governments to deliver a circuit-breaker on industry power bills, analysts say, as stretched manufacturers confront the rising threat of a runaway Australian dollar.

The Aussie dollar yesterday rocketed through US80¢ to as high as US80.66¢, a fresh twoyear peak, as traders turned against the US greenback.

Australian Industry Group chief Innes Willox said the heightened currency was a “concern” for export-exposed businesses and close to the tipping point at which locals lost their competitive edge over foreign rivals. “The higher dollar also adds unavoidable costs to many businesses at a time when rising energy costs are cutting deeply into margins,” Mr Willox said.

“Governments need to redouble their efforts to agree on policies that will put downward pressure on energy costs that are eye-wateringly high to help mitigate the dollar cost impact.” He said there was no magic Australian dollar value perfect for all Australian businesses, but at US80¢ or less, close to 90 per cent of Australian manufacturers say they can compete in export markets and 70 per cent say they are competitive against imports.

The Aussie dollar rally followed the US Federal Reserve’s decision overnight on Wednesday to kept its cash rate on hold. The Fed said it would start winding down its massive holdings of bonds “relatively soon” in a sign of confidence in the US economy. It also signalled that inflation remains persistently below its target.

The Aussie has also been supported by rebounding commodity prices, with key export iron ore now fetching $US70 a tonne, up $US15 in little more than a month.

Westpac senior currency strategist Sean Callow said the Reserve Bank – which meets on interest rates on Tuesday – would be hard-pressed not to change its tone on the Aussie.