Between the lines: Cashing in on a weak currency

Life can't be all that bad.

Perhaps catching the mood of the most recent surveys of business expectations and of forecasts predicting a slowdown of varying degrees in the nation's economy, the Australian Mint has released a new $A5 banknote to commemorate the centenary of federation.

The note shows a distinctly serious federation father, Sir Henry Parkes, on the front, and an equally gloomy Catherine Spence, pioneering turn-of-the-century feminist, on the reverse.

Okay, the new note is worth a good deal less on its issue than it was in the period of its design, after the hammering the Aussie dollar took in 2000, along with the Kiwi, the Euro and many other currencies.

But that hammering is also taking up a great deal of the slack created by rapidly cooling domestic demand.

Australia's exports have boomed with a weaker dollar, and are expected to continue roaring.

In the September quarter, the dollar and strong world demand pushed earnings for the minerals and energy sector up 3 per cent - the third consecutive quarterly rise and the highest on record.

For 2000-01, the Australian Bureau of Agricultural and Resource Economics (Abare) expects the value of commodity exports to increase from $A72.2 billion ($90.9 billion) to $A83.9 billion - a $A2.2 billion rise in farm products and $A9.5 billion more for minerals and energy.

This is all good news for Australia, which is expecting a significant slowdown in manufacturing and employment growth, and is already suffering a serious case of corporate nail-biting.

The weak dollar is not expected to add significantly to inflation, which should remain in the Reserve Bank's 2-3 per cent target band, and with GDP growth likely to moderate, interest rates will probably ease - if all goes as expected.

So the Aussie dollar, which plunged to a record low of US52.8c before clawing back up to about US55.8c by year-end, is now a good thing.

Abare says, for example, that the falling dollar has been thoroughly good for woolgrowers.

While increasing world demand has pushed up prices at home, the US dollar value has significantly narrowed the ratio of wool prices relative to those for synthetic fibre, increasing wool's competitiveness and helping push Australia's eastern market indicator price up 12 per cent to an expected average $A7/kg for 2000-01.

The story for beef and veal is similar. The lower Australian dollar is expected to lift exporter returns, with strong rises in saleyard values that have already lifted cow values to record levels - in November, 35 per cent above those of a year earlier.

Lamb is also benefiting.

Abare says increased exports from higher domestic production and strong overseas demand will be matched by higher returns because of the lower Australian dollar.

Sometimes there is strength in weakness.