Jul 2022

How the fluctuating Australian accounting dollar impacts overseas labour hire companies

By: Odyssey General
Tags: Australian Accountant, Exchange Rate, Exchange Risk, Offshoring, Suppliers

It’s no secret that many Australian SME firms have been seeking labour hire overseas, with the risk as these services are usually quoted and paid in the foreign country source currency.

With an Australian accounting dollar noted as a fluctuating currency, and the recent economic turmoil, especially in times of high inflation, it’s sure the foreign country source currency can fluctuate up to 10% from one month to the next.

In the last 20 years, the AUD to USD has fluctuated between 0.48 and 1.10, a 130% change.

It’s difficult to determine where the Australian dollar might go over the next couple of years, and perhaps looking back at the 1980’s might assist. The 1980’s had a period of high inflation with the inflation rate in 1980 at 10.46%.

As the RBA noted, for all its glories the 1980s ended in failure, a monetary policy failure – a deep recession provoked by interest rates of 18 per cent resulting in unemployment above 11 per cent. With Australia currently experiencing high inflation, it will require careful management in the future to avoid the mistakes of the past.

One way to avoid foreign exchange exposure is to deal with overseas suppliers who can quote and operate in Australian dollars. This passes the foreign exchange risk over to the supplier, who must adequately manage the risk, or go out of business!

For those Australian accounting firms still paying overseas suppliers in foreign currency, this period of economic unease will contribute to increased risk to the bottom line.

Hence it can be expected those overseas suppliers accepting Australian dollars will continue to be in higher favour.

Odyssey Australian accounting outsourcing always welcomes enquiries on how we might assist with your Australian accounting compliance staffing shortages.

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