$A rise 'could wipe $1.7b off exports'

A report released by the Australian Industry Group (Ai Group) says the recent rise in the Australian dollar to above $US0.84 for the first time since August 1990 signals a scaling down in export growth.

The currency is currently some 20 cents above its 10-year average.

"With the Australian dollar approaching $US0.85 in recent times, there is also a risk that the export gains clawed back by the manufacturing sector in the past two years might be further eroded," Ai Group chief executive Heather Ridout said.

"However, it is encouraging that the new report shows that in tandem with the exchange rate pressures, more than half of Australian manufacturing exporters have implemented strategies to improve global competitiveness.

"This has left the sector in better shape than might have been the case."

The new study - The Australian dollar and manufacturing exports: Shaping earnings and prospects - is based on responses from over 700 Australian manufacturers.

Nearly two-thirds of manufacturers believe their exports are uncompetitive at an exchange rate of $US0.84, rising to 93.7 per cent should it exceed $US0.85.

An Ai Group report released last November showed manufacturers expected seven per cent growth in the value of exports in 2007, but the further appreciation in the currency has seen this revised to five per cent, down two per cent, or $1.7 billion.

Manufacturing exporters identified the United States as the export market most hurt by this year's appreciation in the currency and increased competition from other countries.

Greater competition from other countries is seen by more than three-quarters of manufacturers as having the most influence on their export activity.

However, more than half of Australian firms have undergone a significant restructuring to improve their competitiveness from new efficiencies, which is helping to ease the pain from the currency.

The report says New Zealand and China are the export markets with the greatest export growth prospects.

"The Ai Group report also highlights the success of the CER (Closer Economic Relations) trade agreement with New Zealand with one in five exporters saying it had helped them with new market opportunities," Ms Ridout said.

"Encouragingly, it appears that companies are also reaping benefits from the Australia-US FTA (free trade agreement) where some 14 per cent of exporters found it beneficial in moving into that market."

Although China is seen giving potential export growth, a previous Ai Group report found that 50 per cent of companies with a trade relationship with China identified one or more non-tariff barriers limiting their opportunities in the Chinese market.

The report also welcomed the federal government's recent $600 million injection through its 'Global Opportunities' program and new 'Productivity Centres'.

"We welcome these programs as they will build our strategic capability to take advantage of global opportunities in all their manifestations," Ms Ridout said.