Having just returned from a two-week tour of Eastern Australia, I can confidently tell you that the Land of Oz is blessed with many great things: sunshine (a novelty for a Londoner like me), beaches, vineyards, and great food. But these blessings all come at a very high price. Everything – from food to clothes – seemed mighty expensive. And coming from a Londoner that’s saying something!
The very sharp appreciation in the Australian dollar goes some way to explaining the tremendous rise in prices. In the span of four years, the Australian dollar has strengthened from US$0.63 to US$1.05. All else being equal, that implies a virtual doubling of prices! So whereas a pizza in Australia may have cost around US$15 in 2009, it now goes for around US$25.
The incredibly powerful performance of the Australian economy over the past few years has contributed to this sharp strengthening of the Aussie dollar; meanwhile, the European and U.S. economies have been redefining the term “tepid recovery.” Read more