An appreciation of the Australian dollar makes imports cheaper and exports more expensive, which can lead to struggling exporting industries and higher unemployment. A depreciation has the opposite effects, making exports cheaper and imports more expensive, promoting economic growth in export industries and potentially reducing unemployment and improving living standards. Most analysts believe a value around $0.80USD is appropriate for balancing these impacts on the Australian economy.

1. Exchange Rates Part 2
Impact of Appreciation and Depreciation on the
Australian Economy

2. Appreciation
 Imports become cheaper
 Exports become more expensive
 Unemployment can result due to struggling
exporting industries
 More choice for consumers
 Lets come up with an example for each of
these now

3. Depreciation
 Imports become more expensive
 Exports become cheaper
 Economic growth occurs in export industries
 Unemployment can be reduced
 Living standards can be improved

4. The correct mix
 The question of where the AUD should sit is
an academic one
 Of course the a massive depreciation in the
dollar or a massive appreciation in the dollar
is not healthy for the economy
 Most commentators say about $0.80USD is a
good equilibrium for the AUD…

5. Paragraph Response
Discuss in a well set out paragraph, the impact
that an appreciation would have on a foreign
company who imports goods into the Australian
Economy.