Diving A$ hurting consumers

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Consumers start to hurt

By JOSH GORDON ECONOMICS CORRESPONDENT CANBERRA

Friday 20 October 2000

The Australian dollar yesterday plunged to a new low of 51.52 US cents as evidence emerged that the currency's descent and high oil prices are fuelling inflation and beginning to hurt consumers.

Figures released by the Bureau of Statistics yesterday show manufacturing costs have been driven higher by soaring oil prices and the besieged dollar.

The bureau said manufacturing costs rose by 18 per cent over the year to September, the biggest jump in 20 years.

Economists said these costs might soon be passed on to consumers and this would increase pressure on the Reserve Bank to raise interest rates early next month.

Other evidence also emerged yesterday that consumers would soon start feeling the pinch.

Impulse airlines announced on Wednesday that it would increase its prices by an average of 9.5 per cent from Monday.

"The explosion in costs associated with high fuel prices and the ongoing perilous state of the Australian dollar against the greenback has regrettably forced Impulse to show its hand," the airline's executive chairman, Gerry McGowan, said.

Another fledgling airline, Virgin Blue, yesterday said it would follow suit if things did not improve.

The chainstore Harvey Norman yesterday warned it would be raising the price of its products because of the low dollar.

"Anything we import is going up in price, anything we buy from Australian manufacturers, everything is going up," executive chairman Gerry Harvey said yesterday. "We're talking 5 to 10 per cent price rises and if the dollar does sit around this level it might be even more after Christmas."

While the low dollar may be hurting consumers, it is good news for exporters paid in US dollars. Other figures released by the bureau yesterday show export prices grew by 2.1 per cent over the three months to September and by 17.9 per cent over the year.

But while inflation may rise soon, consumers do not necessarily realise this. A survey of consumer inflationary expectations by the Melbourne Institute shows consumers this month expected inflation to rise by 4.5 per cent over the year, virtually the same as last month's 4.6.

http://www.theage.com.au/news/20001020/A61639-2000Oct19.html

-- Martin Thompson (mthom1927@aol.com), October 20, 2000


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