There is a deal of rejoicing in the industry as the Australian dollar bounces back to its highest level in nearly three years against the world's and the IT industry's benchmark economic indicator, the US dollar. According to most channel commentators this is good news but others see that there is also a downside.
General manager of operations and distribution at Todaytech, Michael Chong, said that the benefits to the industry were simple. Because most of the PC components supplied to the local assembly channel were purchased in US dollars, a strengthening local currency made "computers much cheaper".
Professor John Houghton is an economic analyst from Victoria University's Centre for Strategic Economic Studies (CSES). He agreed that the recent surge in the Australian dollar had "to be good for the end users" of information technology and therefore the supply chain. However, in broader economic terms it could also see acceleration in the massive traded deficit generated by information and communications technology (ICT).
Houghton is the author of a report that identified the 2001-2002 financial year trade deficit on ICT to be $14.4 billion or more than half of the national trade deficit. In his Australian Computer Society-sponsored ICT Trade Update, he also showed this to be growing at a rate of 8.34 per cent per year which, if sustained, would see this deficit blow out to over $27 billion by 2010.
The ratio of imports to exports in this industry was running at seven to one, Houghton said.
Australia spent $20 billion on ICT imports in 2001-2002, Houghton said. Therefore, if most of the imports are paid for in US dollars, every percentage point improvement in the value of our currency is worth as much as $200 million dollars.
During April and September of 2001, the Australian dollar dipped below $US0.49, so with last week's surge past $US0.61 cents, there has been a significant improvement in its buying power.
Houghton said this was a "fantastic recovery" but it probably would not help the ICT deficit.
"If we are going to import just about everything that we buy - which is currently what we do - then obviously a stronger Aussie dollar makes everything more affordable," he said. "Put simply, it means that the buyers of ICT can get more for their dollar."
However, Houghton tempered the enthusiasm of the industry somewhat by suggesting there were some extraneous influencing factors at the moment.
"Of course, it depends on why the Aussie dollar is rising," he said. "Sure, it is good for the industry at the moment but it would be even better for the economy if the dollar was going up because of a strong manufacturing sector and software industry rather than because of what is going on in Iraq.
"If tensions in Iraq are diffused, the dollar may come straight back down again," he said. Houghton also said there were artificial forces such as the dot-com boom keeping the dollar low when it was below $US0.50. This was a level that was not a true reflection of the value of the two currencies.
"When the US economy is going well all the US investors tends to pull in their overseas investments and invest it there," he said. "Now that the bubble has burst they are doing the opposite."
So what does our strengthening currency actually mean for those in the channel?
Chong said cheaper prices for the components purchased in US dollars are "passed onto our dealers almost weekly and this has been reflected in the retail prices" of locally assembled PCs. "A more affordable product is a necessity for more Australians to purchase computers," he said.
For the channel's reaction to the ascending dollar, see this week's issue of ARN.