The HIA released an interesting note today forecasting the Australian dollar will continue to decline, possibly down to the US$0.70 to US$0.80 range (see Decline of the Aussie dollar: Where to from here?). I agree with the HIA there are good reasons to expect the dollar to depreciate further. Also, the RBA thinks further declines are not unlikely, with the Governor’s media release today noting:
The Australian dollar has depreciated by around 10 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy.
A further decline in the exchange rate would be welcome news for our tourism industry, which has struggled under the high exchange rate. As an example, see my chart below comparing day trips to the Great Barrier Reef (GBR) (sourced from the GBR Marine Park Authority) and the exchange rate, which shows how visitor numbers dropped significantly as the Australian dollar appreciated.
The declining exchange rate would certainly be viewed as good news in Cairns, which is highly dependent on tourism. Mark Beath at Loose Change is keeping a close eye on Cairns airport passenger numbers, which were soft in May but had experienced strong growth in previous months, thanks in large part to Chinese visitors:
My recent posts on Queensland tourism, which have been keeping track of its slow recovery, include: