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High Australian dollar claims jobs -

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SHANE MCLEOD: The global financial crisis saw thousands of jobs and working hours cut but
Australia's economic recovery is posing its own problems for employers.

The surging dollar has been cited as one of the reasons behind a decision by the global aluminium
giant Alcoa to cut 150 local jobs from its plants in Australia.

The dollar is making it tough for manufacturers because it makes Australian made goods more
expensive overseas and comparatively more expensive than imported products here at home.

The Australian Industry Group is calling on the Federal Government to step in.

Lexi Metherell reports.

LEXI METHERELL: For the 150 Alcoa workers who are set to lose their jobs, the timing could be
better.

Cesar Melhem of the Australian Workers' Union represents Alcoa's Victorian employees.

CESAR MELHEM: The decision wasn't totally unexpected but obviously close to Christmas, 90 workers
likely to lose their jobs and to the uncertainty about the future.

LEXI METHERELL: Alcoa owns Australia's biggest aluminium recycler and only manufacturer of rolled
aluminium which is used for things like drink cans and screw caps.

Alcoa Australia Rolled Products is cutting almost a quarter of its workforce, with restructures of
its Point Henry plant in Geelong and Yennora plant in western Sydney.

It's expecting sales volumes to slump 35 per cent in 2010 as it struggles to compete against Asian
mills who can produce the same products for cheaper.

That's a situation that's only made worse by the high Australian dollar.

FRANK GELBER: The dollar has rebounded from under 65 to now over 90 and that's an absolute disaster
for the competitiveness of domestically produced tradeables.

LEXI METHERELL: Frank Gelber is the chief economist at forecaster BIS Shrapnel.

FRANK GELBER: We've already lost a lot of our manufacturing industry over many years of a high
currency in episodes when the currency is high. But you know the little that we have left that
competes with overseas is under threat.

HEATHER RIDOUT: For export oriented and import competing manufacturing industries it is making life
very difficult.

LEXI METHERELL: The Australian Industry Group's chief executive Heather Ridout says although the
high Australian dollar helps businesses by making their imports cheaper, overall it's a negative
and will lead to more job cuts.

HEATHER RIDOUT: The dollar I don't think is going to be a temporary issue. I think every sign
points to the fact that it's going to stay quite high for quite a long time. So that is going to
drive more restructuring in the sector.

LEXI METHERELL: Of particular concern to Heather Ridout is the state of the local currency against
the Chinese yuan.

The yuan is pegged to the US dollar, something that's caused consternation in the States and in
Australia. As the US dollar has been falling so has the yuan which means for Australian consumers
Chinese imports are an even bigger bargain than they already were compared to locally made goods.

Frank Gelber:

FRANK GELBER: Import competing goods, they just can't compete. So it's much cheaper to produce
overseas because at the end of the day we've got relatively high labour and materials costs.

LEXI METHERELL: The local currency has risen by about a third against the Chinese yuan since March.

Heather Ridout concedes there's little the Australian Government can do to control the exchange
rate but she urges it to pressure China to stop allowing its currency to fall.

HEATHER RIDOUT: That beggar thy neighbour policy that China is running in relation to its exchange
rate is really detrimental for Australian industry.

LEXI METHERELL: The high local dollar carries with it the prospect of ongoing job losses in the
manufacturing sector and a slow economic recovery.

Heather Ridout says there's no silver bullet but she'd like the Government to keep those jobs in
mind as it starts preparing the budget.

HEATHER RIDOUT: The budget is going to be very important in areas like export support and building
industry capability. You know on the face of it there's not an awful that governments can do to
actually dampen the exchange rate.

But I think they can be vocal about issues like the Chinese yuan and the exchange rate policies of
a lot of our competitors that just peg their dollar, their currency to the US dollar and follow it
down.

SHANE MCLEOD: The head of the Australian Industry Group Heather Ridout.