Australian dollar hits new high of $US1.08, but exporters don’t expect help in Federal Budget

Exporters do not expect the Government will increase funding for the key Export Market Development Grant, despite news this morning that the Australian dollar has hit a new record high of $US1.08.

The Australia dollar, which has now climbed by 9% since late February, has emerged as something of a “darling” with currency traders due to the improving investor risk appetite around the world and higher commodity prices.

While most economists and currency forecasters thought the dollar could get as high as $US1.05-1.07, the Aussie dollar is now in uncharted territory.

Exactly how high the dollar could climb now remains unclear, although the likelihood of rises in official interest rates later this year means rates are expected to keep the Australian dollar above parity for most of 2011.

That’s bad news for export experts such as Ian Murray, who is the head of the Australian Institute of Export. He says exporters are not just hurting from the higher currency.

“It’s not just the dollar – the global financial crisis is still there for a lot of exporters. These guys are also facing a lot of added competition domestically from cheap goods coming in from overseas.”

“There are lot of companies in Australia who are facing the prospect of goods coming in from America cheaper than they can get them to market.”

But despite the high dollar and the growing pressure on exporters, Murray is not expecting any relief from the Government in the Federal Budget.

His organisation has been calling on the Government to increase the funding pool for the Export Market Development Grant, the key source of government funding for exporters.

Last year the funding pool was reduced from $200 million to $150 million, although applications for grants totalled $211 million. Companies applying for the grant will receive up to $27,500 as promised last year, but further payments were paid at a rate of between 45-65 cents in the dollar.

Murray wants the funding returned to $200 million.

“The chances of anything in the budget are remote and I find that extremely disappointing,” Murray says.

“We want to see people confident in their export businesses. There is a symbolic aspect here that the Government is showing its support for Australian exporters.”

The Government is promising an extremely tough budget, with few new spending measures and cuts to so-called middle class welfare high on the agenda.