It is great news for Australians travelling abroad but it is causing further pain for manufacturing companies that rely on export income as well as the inbound tourism industry.
Westpac's chief currency strategist Robert Rennie says the Australian dollar is an attractive currency.
"We've got very well regarded globally monetary policy, very well regarded fiscal policy," he said.
"We've got a central bank policy rate at 4.75 per cent. We've got a 10-year government bond yield at 5.5 per cent.
"We've got a currency that is very widely sought after, as long as the US dollar remains weak - which certainly seems likely in the short term - the Australian dollar could continue to appreciate to 1.08, 1.09. Some are even beginning to talk about 1.10."
The rise of the Aussie dollar goes hand in hand with the fall of the greenback.
America's once-mighty currency is plumbing the depths, as authorities effectively trash its value through efforts to stimulate the economy, still spluttering after the global financial crisis.
The US central bank has kept its official interest rate at zero for 28 months now and it is metaphorically printing money; pushing out cheap credit to banks.
That in turn is making US bonds less attractive and pushing investors into hard physical assets seen as safe havens, like precious metals.
For Australia, it is a double whammy. Not only is the US dollar falling against the Aussie, the shift of money into hard physical assets is driving up commodity prices, strengthening Australia's economy and further pushing up the Australian currency.
Good news for the miners, great news if you are heading for California or New York, but not so good for trade-exposed industries here that compete with imports, for exporters and for tourism.
Expensive destination
Felicia Mariani runs ATEC, the Australian Tourism Export Council. She says the industry is taking a hit."It is making Australia an increasingly expensive destination when you throw on top of the high Australian dollar the fact that we also have fuel surcharges now, as we would have seen in the last few days that have come on top of particularly long-haul travel being effective," she said.
"Obviously the price of oil is now really putting a lot of pressure on carriers, so that's being extended on to the cost of our visitors.
"So all of these things add up to make Australia an expensive destination and when you add to that the impost of now the dollar now buying as much when people get here, makes us a challenge."
The waterways of Surfers Paradise are renowned as a holiday hot-spot for trendy jet-setters from Asia and Europe. But not this year.
Peter Gore runs a cruise businesses on the Gold Coast and he says he has seen a big drop in foreign tourists, especially from Asia.
"Certainly over the last six months our business has decreased by a minimum of 60 per cent right across the board," he said.
"I think a lot of that is contributed by the higher Australian dollar; it's just not very conducive for people to come into our country at the moment."
He is having to offer bigger discounts to entice visitors and that is also hitting the company's bottom line.
"We're doing our best. We're using group buying facilities at the moment to try and boost numbers, but of course you also have to reduce your price by 50 per cent to get people to even be attracted to those deals," he said.
Getting nervous
In Sydney's King's Cross, hotel operators are getting nervous.Marcus Lenarduzzi operates the Funk House hostel.
"I would be very concerned if it rose any higher. I think that for us in this industry we certainly couldn't sustain this long term," he said.
He says backpackers are having to tighten their belts to cope with the higher costs of living in Australia.
It has left the Funk House operator scratching his head. His solution - promote the lucrative Aussie jobs market.
"We're definitely more promoting the idea that there is obviously a labour shortage here in Australia and the fact that these guys can come out from home, earn Aussie dollars and actually send the money home if they want to. So they're actually almost getting ahead," he said.
Mr Lenarduzzi says the word is spreading.
"If you look at our Facebook site and the blogs, people are making comments about the fact that you can get out here and get a job quite quickly and that pays really well," he said.
Source http://www.abc.net.au/
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