Tourism

Aussie dollar drops as inflation causes overseas travel prices to rise

Ali Coulton

Ali Coulton

The Aussie dollar dropped to its lowest levels since the GFC over the weekend, as new inflation figures show a rise in overseas travel prices.

Experts said the drop was caused by trade tensions between the US and China, sinking the currency as low as 67 US cents, the lowest it has been since March 2009.

The drop would have been a nasty shock to anyone travelling in the US or Europe over the weekend, and experts predict further drops will continue to shake travellers confidence.

The dollar has since bounced back, sitting at 68 US cents at the time of publishing, but according to a blog on the Travel Money OZ website, we could be in for more losses and certainly continued instability on the foreign exchange market.

The Sydney Morning Herald reported the drop was caused by a series of tweets from US President Donald Trump, who said the United States would impose further tariffs on Chinese imports beginning in September.

Richard Grace, chief currency strategist at the Commonwealth Bank told the Sydney Morning Herald the dollar is likely to remain under pressure as trade tensions grow.

On the bright side, Flight Centre’s media and investor relations manager, Haydn Long, told Travel Weekly the dollar doesn’t tend to have too much impact on where people travel.

“The outbound travel market tends to grow every year, regardless of the dollar’s value against the US dollar,” Long said.

He told us that if people are concerned, they are more likely to adjust their spending at the destination, for example, they may stay one less day or opt for an apartment so they can eat in more.

However, while a weak dollar may translate to less in-destination spend, Long said this is offset by travellers spending more on experiences before they go, softening the effect on travel agents.

The dollar drop comes as new inflation figures indicate a 2.7 per cent increase in the cost of overseas holiday travel and accommodation, the ABC reported.

However, now might be the best time for travellers to explore their own back yard, with the same figures showing a 1.5 per cent drop in the price of domestic travel.

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