Thursday, March 12, 2015

Australian dollar lowest since May 2009 but RBA says not low enough

In long-awaited good news for local exporters, the Australian dollar has hit its lowest level since the depths of the global financial crisis.

Now markets are betting on how low the dollar could go as the softer currency starts working its way through the economy.

Listen to my report from this morning's edition of AM.

Earlier this morning the dollar went as low as 75.6 US cents - the lowest point since May 2009 in the wake of the Lehman Brothers collapse.

The lower dollar represents a welcome shift for the Australian economy after peaking at more than 110 US cents in August 2011 when Australia was riding the wave of the mining boom.

While the surging dollar was great news for anyone travelling overseas - especially to the United States -   it was crunching local exporters.

Many smaller players went to wall and big local manufacturers like Ford, Holden and Toyota are now moving offshore citing the high dollar as one factor.

But now, the tables are turning with the dollar lower in part because of good economic news in the US is fuelling a resurgent greenback.

Yesterday, Reserve Bank assistant governor Chris Kent noted that exports of services like tourism and education are bouncing back and in terms of income, they're overtaking exports of iron ore which is now below 58 US dollar a tonne this morning.

Over the past year, the RBA has cited 75 US cents as an approximate target for the Australian dollar but speaking in Hobart yesterday, Chris Kent sent signalled that the dollar might need to go much lower to provide maximum relief for exporters.

Economists remain focussed on when the Reserve Bank might cut the cash rate again to put downwards pressure on the Australian dollar.

A key focus will be on official employment figures from the Bureau of Statistic for February to be released this morning.

Most economists think the jobless rate for February will remain steady at around 6.4 percent with some predicting a slight fall to 6.3 percent.

However while the unemployment figure remains in that vicinity still the RBA has good reason to be be nervous especially with predictions that it could peak later this year at 6.75 percent.

"The Australian dollar has depreciated by nearly 20 percent on a trade weighted basis  since its peak in mid 2013 and is starting to play a role in helping the economy to adjust," Dr Kent said.

 "While the depreciation seen to date will be helpful it's still our assessment that our exchange still remains relatively high given the state of our overall economy."

Wednesday, March 11, 2015

Cheques not dead yet, but demise is in the mail

The future of cheques as a payment method for many Australians is continuing to slide with transactions falling by almost 14 per cent in 2014.

In a sign that rusted-on cheque users are adapting to changing times, electronic payments grew in the same period with payment card use up by 8.8 per cent and direct debits by 7.5 per cent.

The Australian Payments Clearing Association, which regulates the payments industry, says while cheques are gradually falling out of everyday use they are still being used for major business transactions and property settlements.

The research adds to evidence that cheque use has been declining over the past decade with a 71 percent demise between December 2002 and December 2014.

APCA's chief executive Chris Hamilton told AM that although a "hard stop" to cheques was unlikely,  users should consider switching to electronic alternatives which are now secure, cheap and reliable.

"Older people are much more likely to use cheques than younger people. What the most recent figures show us is that cheques are falling out of general ordinary everyday use quite quickly," Mr Hamilton said.

"Cheques reached their sort of high point in the mid 90s and they've been in decline ever since. The first part of that was quite slow but I think now we're seeing the volumes of them dropping off. So I expect that within the next few years I'll be quite rare to see a sort of cheque in everyday ordinary usage, although they will still be used for specific types of transactions."

But Mr Hamilton says while cheque usage is unlikely to bounce back, banks are unlikely to cease accepting them for the time being.

"It's unlikely that in Australia we're going to have a sort of hard stop. That's been talked about in various countries around the world that perhaps didn't have as strong a tradition of cheques as we do where they have actually turned the cheque system off," Mr Hamilton said.

"What's more likely to happen is if people want a cheque book then they'll have to find an organisation that wants to supply that. Increasingly their biggest problem will be the payees don't want to accept their cheques. So over time it's going to get harder and harder to use them."

Mr Hamiton said the biggest concern for banks and consumers is the cost of processing cheques which can cost five dollars per payment.

But he says the increasing trend for merchants to switch from accepting cheques to electronic payments only will ultimately encourage ever "rusted-on" cheque users to make the switch.

"It is very cultural. And I'm not sure that it's to do with specific issues about security or anything like that. In fact according to our statistics the fraud rates on cheques, while they're low, are still higher than for example what we would call a direct entry payment, which is the sort of basic electronic payment that goes through the system," Mr Hamilton said.

"So I don't think it's really a security issue. I think it's much more what you grew up with and what you feel comfortable with. And so we see it as a process of gradually saying, hey look, there is another alternative. It might be easier for you to use it once you get yourself set up."

Research by APCA shows the Australians are using less cash with the number of ATM cash withdrawals down by 4.8 percent to 714 transactions valued at $143 billion.