Many exporters in the manufacturing and service sectors are struggling to cope with a high Australian dollar that is damaging their export competitiveness. At the same time, resource exporters are doing very well, despite a roughly 20% increase in the value of the Australian dollar since 2006, their sales have grown by nearly 150%.

This apparent contradiction is explainable once you understand the reason for the surge in the dollar. The rise is partly due to strong Asian demand for Australian iron ore, coal and LNG, which has lifted commodity prices and export volumes. Private capital inflows drawn in by Australia’s relatively strong economic fundamentals compared to other developed economies ─ reflected in its relatively high interest rates and AAA credit rating ─ have also contributed.

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