If the AU$ dropped to US$0.65 ..

[OzJavelin]

.. as I remember it in day's gone past .. And it dropped a corresponding amount against the Euro, the Pound, the Yen, the "whatever the Koreans use", etc .. Does someone more savvy in economics want to take a guess as to how much a $30,000 Mondeo (for example) would cost in Australia then?

I'm interested to understand that if Australian automotive manufacturing was abandoned because its "uncompetitive" and people are happier with cheaper imports .. How cheap would those imports be when the currency changes?

Or am I just being overly simplistic here? Would they just fiiddle the figures so that it was the same to avoid price shock?

[Dr Smith]

To give you an example from another industry when the Aust. dollar rose steadily I expected the cost of the raw materials to drop by a similar percentage. Guess what, they did drop , but very small in comparison, say 5-10% compared to a currency change of 50%. So the importers here increased their profits levels instead. When the currency dropped, prices went up by the currency change so we never "won". A bit like the banks, rate drops never as much or as quick as rate increases.

In your scenario imported cars would definately increase in price as would any imported component for locally assembled cars. It might be too simplistic but lets say a Falcon has 35% imported parts buy dollar value, and so that % percentage of it's parts would rise in price due to the fall of the $Aust. So a currency drop will hurt fully imported cars more however it would also effect locally built cars as well. Not by as much but then the effect on the final buyer depends on what the importers do. It would definately make exporting cars from here more attracive as well.

[jpd80]

More than ever, I'm convinced that our car prices in Australia are made up and based on what car companies think people will pay for their products.
Just look at parallel pricing in the UK or USA and you'll see some alignment with light and small cars but once you head towards mid size and larger,
Aussie buyers get skull ********d left , right and centre..

[windowlicker]

Matey, at US0.65 you could not afford to fill your tank. At a guess, ULP would be 2.50 a litre. All air tickets, all freight, all food, all up. And you could not afford to go overseas to travel either.

And you couldn't take an aussie holiday cause our tourism industry would be booked out by foreigners.

[windowlicker]

Originally Posted by jpd80

More than ever, I'm convinced that our car prices in Australia are made up and based on what car companies think people will pay for their products.
Just look at parallel pricing in the UK or USA and you'll see some alignment with light and small cars but once you head towards mid size and larger,
Aussie buyers get skull ********d left , right and centre..

Regarding new car prices, the shakeup should be in the distribution. Middlemen in loads of products are going like dominoes because of online direct sales.

I once was a office machine fixer and I checked out a new car invoice to dealer which included (from memory) 1800 advertising subsidy and other stuff for each car supplied. There was about 7000 - 8000 gross profit before expenses and fees at a dealership. That was 10 years ago.

[GasoLane]

Originally Posted by windowlicker

Matey, at US0.65 you could not afford to fill your tank. At a guess, ULP would be 2.50 a litre. All air tickets, all freight, all food, all up. And you could not afford to go overseas to travel either.

And you couldn't take an aussie holiday cause our tourism industry would be booked out by foreigners.

Don't you remember when the Ozdollar was 49c ?

We were told that was why our petrol prices were so high, (and air tickets, freight food etc didn't go up.)
Then the dollar went up (or the USD went down) and we still pay high prices for petrol.

[Reaper8]

ya food didnt go up becuase it was cheaper to sell australian produced food, a lot is imported now cos the oversea's stuff is cheaper

[excopau]

We want overseas to come spend there money here and make more money for Australia.

[neptune blue]

Originally Posted by jpd80

More than ever, I'm convinced that our car prices in Australia are made up and based on what car companies think people will pay for their products.
Just look at parallel pricing in the UK or USA and you'll see some alignment with light and small cars but once you head towards mid size and larger,
Aussie buyers get skull ********d left , right and centre..

I agree with you to a point but you are forgetting that the US market is huge compaired to the Australian market

The more cars you sell the cheaper you can produce them
Also wages and cost of living is lower in the US but I do think we are paying too much for a lot of things, not only large locally produced sedans

[jpd80]

Originally Posted by neptune blue

I agree with you to a point but you are forgetting that the US market is huge compaired to the Australian market

The more cars you sell the cheaper you can produce them
Also wages and cost of living is lower in the US but I do think we are paying too much for a lot of things, not only large locally produced sedans

Yeah, I know but the UK price difference between the two cars is around a thousand pounds,
so if a Titanium Focs is $36K here, that means a Titanium mondeo should be around $38K

When you look at low series Fiesta and focus, they kinda tally with here but
a $49,000 Titanium Mondeo stands out like a red flag

[falconnut]

In a perfect world Australia would have its Independence and fuel would only cost $1 a litre.

Not so

[jpd80]

Originally Posted by falconnut

In a perfect world Australia would have its Independence and fuel would only cost $1 a litre.

Not so

Or we just take the 38.5 cent a litre excise off it and just pay GST,

Double taxation is the work of the devil....

[Road_Warrior]

Originally Posted by jpd80

Or we just take the 38.5 cent a litre excise off it and just pay GST,

Double taxation is the work of the devil....

Yes paying GST on something that already has a tax built in is massively ****erish. But that's government for you.

[falconnut]

Originally Posted by Road_Warrior

Yes paying GST on something that already has a tax built in is massively ****erish. But that's government for you.

At least we are in the black, yes $1.20 a litre is pretty bad but at least our economy isnt in the toilet yet.

[nstg8a]

Where do you get fuel for $1.20?

Also I was in nz when fuel first broke the $2 mark. It wasn't the end of the world people bitched and moaned and that was about it.

Yes prices went up but not massively because the price was always edging up so it was no shock.

Really we still have some of the cheapest fuel in the world , arguably amongst the best living conditions anywhere.

As bad as things sometimes seem, we have it pretty bloody decent here.

[whynot]

At one point, the AUD was as low as 0.49 USD.

As for import pricing, each importer is different. Some of the bigger ones are prepared to loss lead for a little while, provided they perceive a (negative) currency fluctuation as being transient, and it works in their long term interest to be price stable.

Yes, some of the upmarket importers (or more correctly their home country) are presently making good money out of Oz buyers. But, if people are stupid enough to buy at inflated prices, then manufacturers are more than willing to sell.

To answer your question;

Take $30,000 and multiply by 1.039 (to covert it to present day USD) = $31,170

Now divide $31,170 by 0.65 (the past AUD/USD exchange rate) to convert it back to AUD (2005) = $47, 953

As for the price of fuel remaining relatively static, back when AUD was 0.50 USD, fuel was bouncing around near $20 a barrel. Brent is currently around $106 per barrel. If the world economy wasn’t so weak, and the AUD was back around, say, 0.70 USD, one could easily be paying around $2.50 per litre.

As for the “middle men”, as economists would tell you, they are moving items through the space-time continuum (and, no, I am not taking Star Trek babble). So, they do need to be compensated for it. For example, a can of Coke costs around $0.50 cents from Woolworths. Yet, a vending machine often has it for sale at, say, $1.50. Once could, with some forethought, buy a can from Woolworths, refrigerate it, and take it with them when they go out. The people who run the vending machine have moved it through space (from Woolworths to the location you are thirstily standing) and moved it through time (from, say, yesterday when you could have bought an identical can from Woolworths, to the time right now where you are standing in front of the machine).

[aussie muscle]

Originally Posted by jpd80

More than ever, I'm convinced that our car prices in Australia are made up and based on what car companies think people will pay for their products..

i reckon you are right, i mean how much more would it cost Ford to build a focus compared to a mondeo? the size difference would only add a tiny percent of 'more steel', but everything else is the same.

[flappist]

There is a huge flaw in all of these conversion calculations.

Prices are worked out using this formula:

Price = (what people will pay) * 1.1 - (10% to look like it is being discounted)

What people will pay is a variable figure, the higer the price the lower the number of people will pay it. This is set up so the number of items sold is controlled.

For example:

The price of petrol in Australia is set to allow the flow of fuel to be linear.

If it is too high people stop buying and the storage fills preventing ships from being unloaded and costing huge amounts of money.

If the price is too low then people buy too much, the servos and storage run low or out and there has to be panic shipments to cover this which costing huge amounts of money.

The whole thing is artificial which is easily demonstrated by comparing prices world wide.

Before you all get angry about this, wages are set the same way.

Hourly rate = (the absolute minimum you would accept * 0.9) + 10% bonus.

The conversions between all the currencies is also totally artificial. It needs to be so "they" have controll over the money flow.

Some think it would be ideal to have one currency for everyone but so far the "euro experiment" has not worked out so well......

[bingoTE50]

Well I would not mind seeing the dollar at @ .80 to .85 . Low enough to stimulate tourism ,yet high enough to make imported goods still palatable ,but give local content an even chance. We need tourism to be firing to take the focus of mining . Places like the Gold Coast are suffering big time as are other holiday destinations. These places are the big employer of young adults .

[SteveJH]

A lower Australian Dollar actually makes mining even more profitable for the mining companies.

[whynot]

Originally Posted by flappist

There is a huge flaw in all of these conversion calculations.

Whoa, stop right there. The maths are correct.

You are actually applying your own personal economic theories to a very complex and interconnected global economy. May I suggest some time is spent reading first year economic principles like;
http://en.wikipedia.org/wiki/Supply_and_demand
http://en.wikipedia.org/wiki/Aggregate_demand
http://en.wikipedia.org/wiki/Complementary_good
http://en.wikipedia.org/wiki/Marginal_cost

Independent and floating currencies are the way to go. It protected Australian when it was 0.49 USD and it is protecting Australian interests when it $1.10 USD. (Regardless of the crap one reads in the tabloids.) A floating and independent currency is, what economists call, an automatic stabiliser. Yes, the mining companies would make more money in AUD terms if the dollar was at 0.85 USD. And that is the beauty of it. The high Aussie has acted as a brake on excessive inflows of money into Australia. But, remember, a lot of the mining companies have their debt priced in USD. So, the price of the Aussie is irrelevant.

The Euro was an experiment in social-political engineering, enough said.

[foxtrot3]

Hi. While everyone is talking about fuel pricing and importing I have 4 questions
1. How much of our fuel is imported?
2. Where is it imported? (what port/state)
3. from where?
4. Why?
Cheers MD

[jpd80]

Originally Posted by foxtrot3

Hi. While everyone is talking about fuel pricing and importing I have 4 questions
1. How much of our fuel is imported?
2. Where is it imported? (what port/state)
3. from where?
4. Why?
Cheers MD

Our oil is mostly exported to Asia as refineries here cannot process it, we import oil form Asia that can be refined her but not for long,
Shell has decided to close down all refineries in Australia, starting with Clyde in Sydney.
Other refineries will follow in future, the tech in them is old, maintenance is expensive and
the cost of refining can be done more cheaply overseas.

[Bossxr8]

I don't think Shell have decided to shut down all their refineries yet, the Geelong refinery is still going and they are spending millions there building a water treatment plant to harness stormwater.

It won't last forever but they are upgrading it at the moment.

[IDT]

Originally Posted by nstg8a

Where do you get fuel for $1.20?

Also I was in nz when fuel first broke the $2 mark. It wasn't the end of the world people bitched and moaned and that was about it.

Yes prices went up but not massively because the price was always edging up so it was no shock.

Really we still have some of the cheapest fuel in the world , arguably amongst the best living conditions anywhere.

As bad as things sometimes seem, we have it pretty bloody decent here.

It's wrong to compare NZ as a standard for the cost of anything related to transport, and therefore fuel, so down playing its importance is a misnomer. What is the distance from any port in NZ to the furthest point of land. Now compare how far goods get shipped here. I will bet our average distance would be further than NZ's furtherest. The cost of fuel in Australia is so important because the distance goods travel by road, not people, which is massive compared to NZ and any other 1st world country. The fuel excise is the great big cherry that the government recieves for NOT having any real national infrastructure other than a few highways. Its money for nothing because we all know it isnt getting spent on roads. But wait there is more, once the carbon tax also gets added................. I know I have gone way of thread. Sorry

[Buntz]

Originally Posted by GasOLane

Don't you remember when the Ozdollar was 49c ?

We were told that was why our petrol prices were so high, (and air tickets, freight food etc didn't go up.)
Then the dollar went up (or the USD went down) and we still pay high prices for petrol.

It's called the "You Are Australian And Will Therefore Pay More Tax".

[ltd_on20s]

Originally Posted by Road_Warrior

Yes paying GST on something that already has a tax built in is massively ****erish. But that's government for you.

and that's why they do it. because they know they will get away with it and australians are too apathetic to go and protest in huge numbers.

[mik]

and to BossXR8`s post about shell shutting down refinery`s, and now it`s Caltex`s turn.
do you guys feel we are heading majorly in the wrong direction relying more and more on imports for everythiong? cars, fuel, food, machinery, car parts, even some of our building material makers are being costed out of the industry(out of Australia), i have to say it scares the crap out of me.

http://www.theage.com.au/business/ca...726-22sd6.html

[JG34JA]

Originally Posted by mik

and to BossXR8`s post about shell shutting down refinery`s, and now it`s Caltex`s turn.
do you guys feel we are heading majorly in the wrong direction relying more and more on imports for everythiong? cars, fuel, food, machinery, car parts, even some of our building material makers are being costed out of the industry(out of Australia), i have to say it scares the crap out of me.

http://www.theage.com.au/business/ca...726-22sd6.html

Yes, I completely agree.

What should happen, is the high AUD eradicates our production base, we enter recession, the AUD plummets and we become competitive again. It becomes viable to produce and compete here, we feel the pain, note our errors, change our policy, and become a great place to attract business, and profit. That's how it's supposed to work.

What's really happening is the rest of the Western world is insolvent under an enormous debt load, and is pursuing ZIRP (Zero Interest Rate Policies) and deliberately devaluing their currencies. This is destroying capital and savings, which are ultimately needed for production and growth. This also makes Australia's financials, with their higher yield (government, corporate bonds, and equities) and low(er - they're trying!) level of government debt in more demand as you can actually achieve a yield here. The demand for this yield keeps our currency high, which strip-mines our productive base ("Dutch disease").

Apart from massive mining CAPEX (which will end when the big miners can no longer tolerate losses on expenditure as commodity prices fall, as they are beginning to), we're getting slaughtered. It takes just one "QE" announcement to send commodities soaring however, so the world, and all investment decisions, are made in this shadow. The "Quantitative Easing" sees central banks manipulate the interest rate lower via purchase of government bonds (from primary dealers, but that's another story: just know it floods liquidity) - and artificially lower the price of money in our society. It's having terrible consequences - but the alternative is what's known as a "system reset", where we discover who is swimming nude. As nobody can bear this eventuality, we blunder on.

In addition, when Australia was faced with recession in the GFC, it was decided to fire the Keynesian Stimulus Cannon (we could afford it), so recessionary effects, and resultant increase in competitiveness, were delayed. Think FHOG extension. They have enough ammo to fire it again (about 36% public debt, get over 80-100% and Greece/Spain future awaits), and they will if faced with something like the GFC. In the meantime, viable productive businesses become roadkill, unless in mining.