Pre-Christmas shopping is urgent. Don’t wait till next month if your planning a major consumer products purchase. Harvey Norman is not kidding when he advertises that his furniture prices will be going up. The Australian dollar drop in recent months has seen the Australian dollar (AUD$) exchange rate drop from a high of US$0.97 in July 2008 to currently under US$0.62.

That difference is more than a 35% drop and will translate to a real 35% increase in the prices that importers and wholesalers (and consequently retailers) will now have to pay for any new goods manufactured overseas compared to July.

Since Australia effectively has no manufacturing industry (thanks to unionism and Workcover, forcing costs that the market simply can not bear), then whatever you are planning to buy is going to be manufactured overseas and 95% of foreign manufactured goods are quoted and paid for in US$.

The supply chain of course always has a lot of goods in warehouses at pre-crash prices but these are currently being pushed out at discount prices to keep sales targets up and wont last too long. So unless your next large purchase is from that existing stock (and only for as long as retailers/importers remain prepared to sell at pre dollar crash prices), then it is for sure that your large ticket product that currently might have a sale discount, is going to have a hefty price increase shortly.

The bad news is that future projected interest rate cuts are going to keep the dollar low or send it lower. In the large scheme, supply and demand determines the level of our floating $AUD dollar exchange rates. When our interest rates are cut, international investors buy less Australian interest rate securities, so there is less demand and resultant downward pressure on the Australian dollar exchange rate.

Do your shopping early this Christmas!!