The Australian dollar has touched below parity with the US dollar for the first time since December last year.
This will no doubt disappoint the long line of Australian citizens touring the world, firms importing products and capital items and the foreign investors that have invested in Australia while the dollar was so strong.
But it will bring some respite for the few manufacturers that are still based in Australia, the farmers that export into the international markets and the miners that are based in Australia.
The Australian dollar is being pushed down mainly by softer data from China and the exit of international investors to safe haven currencies amid fears that Greece will exit the Eurozone, as its constitutional crisis continued through the weekend.
Will it stay that way? While reports say banks are factoring in the dollar to remain around 98 cents to the US dollar, academics like Ken Clements at the University of Western Australia have argued it should be much closer to US 75 cents than to parity. It is difficult to fault his argument, particularly given the history of the Australian dollar since it floated in 1983.
There are a number of measures of underlying foreign exchange rates and some recent modelling by Professor Clements suggests that the Australian dollar is overvalued. This analysis is based on relative purchasing power which suggests exchange rates in the future considerably less that the present USD exchange rate.
Overseas tourism has grown dramatically with strengthening of the Australian dollar, though Australian tourism has languished.
A clear winner with a fall in the Australian dollar will be the Australian tourism industry. This is an important employer, particularly on the east coast of Australia.
Australian manufacturers have been struggling with the high Australian dollar. Any fall in the dollar will be welcomed in most cases except where capital equipment like air planes, furnaces or other high tech equipment will need to be acquired because this will now be more expensive.
The movement of manufacturing off-shore has continued at a rapid rate with the higher Australian dollar seen in recent years. Perhaps falls in the value of the Australian dollar will lead to a reduction in the number of jobs moving overseas in the future as export revenue improves and the cost of capital equipment increases.
Foreign investors who have invested in Australian securities will not be happy with a fall in the value of dollar Australian. The share market has been flat for some time and if this continues then investment returns (expressed in US dollars) will fall as the Australian dollar falls.
Australian investors who invested overseas while the Australian dollar was strong will tend to reap increased returns from the fall in the Australian dollar.
Further, if the Australian dollar continues to fall the Australian financial markets will be become more attractive to foreign investors and overseas financial markets will become less attractive to Australian investors, all else held constant.
Farmers have faced considerable pressures with the Australian dollar at levels exceeding parity. While Australian farmers are very competitive it is difficult to compete when prices are boosted by an Australian dollar that is very much higher than normal, at least relative to the period since the Australian dollar floated almost 30 years ago.
A fall in the value of Australian dollar will lead to an increase in their income. With the recent fires, droughts and storms this will bring some welcome relief to a critical sector of our economy.
The Australian miners will certainly not complain about a fall in the Australian dollar either. Virtually all of their production is sold on the international markets and it is priced in terms of US dollars. The fall in the Australian dollar will certainly improve their profits and their ability to compete with competing producers in other parts of the world.
In all, there will be winners and losers, though the Australian economy, particularly the east coast of Australia, will probably be the winner as the foreign exchange rate declines.