A new survey has found that a surprising proportion of Australians lack fundamental knowledge of how Australian dollar movements impact them personally or the economy.
The findings were derived from a survey of an independent panel of 1,002 Australians, commissioned by Money Transfer Comparison, a money transfer service review website.
More than half of the respondents do not know what an exchange rate is, believe overseas goods and services are cheaper when the Australian dollar is lower, or believe Australian goods are cheaper for US tourists when the Australian dollar is higher against the USD.
Survey results
In the survey, respondents were presented with four statements about the Australian dollar and were asked to identify those they believed were true or false.
A significant proportion of responses were incorrect.
- True or false? When the Australian dollar exchange rate increases against the US dollar, goods and services in Australia are cheaper for US tourists.
Similar proportions of respondents across different ages and states struggled to determine whether the above statement was true or false.
39% of over-50s respondents could correctly identify the above statement as false, followed by 36% of 25 to 54-year-olds and just 26% of under-35s.
Similarly, just over a third (37%) of Queensland respondents could correctly identify the statement as false, followed closely by 36% of Victorians, 35% of NSW respondents and 34% of South Australians and West Australians.
- True or false? When the Australian dollar drops in value against the US dollar, products that Aussies purchase from the US are cheaper.
In fact, a lower Australian dollar makes overseas purchases in USD more expensive for Australians, as it is more expensive for Australians to exchange their funds for the US dollar.
When the Australian dollar is higher against the US, tourists from the US or those living in the US will pay more for goods purchased from or within Australia.
- True or false? The exchange rate is a fee charged by banks on every overseas purchase or overseas money transfer.
The exchange rate refers to the difference in value between two currencies, such as the Australian dollar and the US dollar.
For instance, under the current exchange rate of US$0.70, Australians will unfortunately be paying more to receive less US dollars in return.
Having said that, fees by banks are involved in international purchases and money transfers.
In addition to the exchange rate, banks will charge an international transaction fee, which is incurred on overseas purchases and international money transfers.
This fee averages ~3% of the sale price of an item, which can become costly for Australians who regularly make overseas payments.
- True or false? When the Australian dollar increases against the US dollar export prices go up for foreign buyers.
Overall result
Overall, a third (33%) of respondents incorrectly indicated that all four statements were true, despite only the last statement being correct.
91% got at least one statement wrong.
Fluctuating exchange rate
The rising cost of living emerged as a significant issue in 2022, with consistent interest rate rises occurring from May, an inflation rate that rose to 7.3% by November and a volatile share market that caused uncertainty over investments.
The Australian dollar also fluctuated throughout the year, peaking in early April to $0.76 on the US dollar, before falling to US$0.62 in October - its biggest fall since April 2020.
While it rose to US$0.68 in November, by January this year the dollar sits at just US$0.70.
The Australian dollar also remains low against other global currencies: currently $0.57 against the British pound and $0.64 against the Euro.
Inadequate knowledge on AUD movements
Alon Rajic, founder and managing director of Money Transfer Comparison, says: “It is concerning to see that Australians lack fundamental knowledge on the Australian dollar, its movements and its impact on the economy and consumer spending.
“The ongoing fluctuations in the Australian dollar are likely to continue well into this year, with forecasts of only a slight increase in the Australian dollar to US$0.72 by June this year.
“However, AUD movements will likely be unpredictable, given the current climate and a projected economic downturn.”
Keep an eye on exchange rates
Despite high costs of living, four in five Australians are also still planning to travel this year, with more than a third (37%) intending to travel overseas.
Alon adds: “Given the low value of the dollar, coupled with inflation, Australians will need to be prepared to spend more on goods purchased within and from the US this year.
“Australians would be wise to ensure they are well versed in the Australian dollar to avoid paying more than necessary when travelling, particularly during the current climate of high costs.
“Keeping an eye on exchange rates, and timing transfers of funds, will be especially important when sending money this year.”