The continual decline in the value of the US Dollar is starting to have a back lash on pricing.

In the last 12 months the USD has fallen some 22% against the Aussie Dollar.

Whilst many may think that a stronger Aussie dollar equates to cheaper prices, nothing could be further from the truth!

Products fully sourced and manufactured in the US are certainly cheaper, however any product using imported components (which the majority are) is facing stiff price increases as overseas component and product suppliers increase their export prices in an effort to regain some of their lost profits due to the poor exchange rates. With few exceptions most overseas transactions are completed in USD (Europe being the only real exception and then only for local transactions).

The word on the street is that price rises are coming.

units produced in the US, with majority of assembly and labour and profit sourced in the US, should remain cheaper.

you could just put the prices up over easter? seems to work for petrol stations

Good luck with that one

Its basic economics. Importing is cheaper because the dollar has risen. My AT drivers are now cheaper because of the stronger dollar.

Go Aussie!!

It's simplistic to say a stronger dollar equates to lower prices, in reality head units use semi conductors made in Asian countries, many speaker manufacturers source magnets or baskets from Asian countries, lets face it Asia has a big bearing on manufacturing these days.
Asian suppliers get paid (for the most) in USD and then exchanging it for their local currency, when they are getting a poor exchange rate they jack their prices up recover the loss.

Unfortunately most economies are dependent on the USD as a major trading currency.

increasing prices to recover lost margin is fine if your working on a shipment by shipment pricing but do I believe major international manufacturers do that .... not really!

most would have forward purchasing contracts in place so pricing may change over a year but not month to month.

at least thats what happens in the marine industry on a world wide basis

US dollar go's up = Price rise
US dollar go's down = Price rise
US dollar stays the same = Price rise.

so in theroy this thread is useless cause no matter what happens, the prices are going to go up!

Prices are going up for everything at the moment but at different rates,
and when you consider a lot of the components sourced from Asia are made in China, one should take note that China pegs its currency against the USD. So in fact what happens there should happen to the Chinese economy, this is because the US economy is important to the Chinese economy and its biggest market. So essentially rate changes should be negated. Prices however will continue to rise because of other reason for example inflation and petrol which is going to be used in all shipping mediums.
This is not to say that some companies just need any old excuse to raise prices(Generally speaking).
This is my take on things anyways.

stoopid americans sticking their fingers where they don't belong. all is well and good for them to go down the toilet but to drag every other country with it?

despite imported goods being more expensive(which is all car audio basically) the bright side is the Aussie dollar is getting better which for locally produced stuff and stuff we are exporting should be getting better right?

so why dont the gits at shell and caltex do that because suprise suprise i had to pay 167.9 for premium over the ANZAC weekend. fair my foot

not quite.

If the value of our dollar rises compared to the value of our major trading partners' currencies, then, effectively, our net exports will decrease.

This is because overseas companies need to buy australian dollars to pay for our export goods. Thus, a US import company now has to spend 20% more than they did 12 months ago in order to buy the same number of Australian Widgets ™, because the US dollar has dropped in value compared to ours. So the prices of our widgets rise in the US and US customers dont buy so many (they buy US widgets instead).

crazy huh?

also, oil being an easily tradable and homogenous commodity (ie US oil is the same as Saudi oil), any movement in current crude price is quite likely to affect the price at the pump. Yes, futures markets do help to smooth price changes from day to day, but generally the price we pay is pretty dependent on the change in world oil price.

At least, thats what Caltex etc tells us in order to justify price rises without the ACCC fining them...

BASTARDS!

btw...to the OP...

"Whilst many may think that a stronger Aussie dollar equates to cheaper prices, nothing could be further from the truth!"

your explanation doesnt quite hold water for me...care to elaborate properly as to why Australians should be expecting price increases for our audio gear?

Very well said! The happy medium if one can put it that way is 1AUD=.75USD (according to some estimates), this is supposed to be the ideal compromise for exporters and importers.

I pretty much agree with what Fudd and Poisoner had to say.

Live IS getting more expensive and has been for the past decade RAPIDLY. I remember the days when Unleaded at the pump was only 60c P/L. and I'm only 18... Or what about when you'd hit Coles and fill the trolley to it's lip for no more than $30.
What this has to do with this thread I don't know However BECAUSE life was so darn cheap coupla' decades ago, guess what "mother economy" decides to do everytime? Right... Balances itself out.

Yes yes I know, wages also go up. But I'm sure the tax rates and fuel prices aren't doing the "majority" of the people any good.

the way I see it, the only way we are going to overcome our need for increasingly scarce and risky oil (which leads to what, people? anyone? anyone? higher prices...) is to invest as a country and as a society in alternative energy sources. Like nuclear, wind, sun, hydrogen, electric fuel cells etc etc etc.

any thoughts about what the likely source of capital is to fund that investment?

anyone?

anyone?

Fry?

The problem is when the country does move to do things there are a lot of people who don't like it, for example nuclear power which is one of the most feasible sources of power available to us. Wind and solar aren't really that feasible and will cost a lot more.

Fuel companies seem to justify there fuel prices by telling us that we are lucky for our prices and that they are cheap, they forget to tell us that the reason we have the 4th cheapest price of petrol out of developed countries is that we have lower taxes on oil compared to the rest. Get this for a estimate tho $3.34 a litre by 2010. That would mean the near death of car audio for the average person...Not Good.

how is solar power not feasable?

44% of australia is uninhabited desert. other than sand, what is there lots of in a desert? omgwtfhax??!?!?!one its SUN!!!!!

how exactly will that cause the death of car audio?

do you think people will give up their "personal transport solutions"????

nope. no way. they'll just find other energy sources to drive them.

First I was exaggerating lol.
But it all depends how long exactly it takes to come up with these new ways to power them. There are accounts stating that there are already different ways to power automobiles that are feasible, but they are not released yet and there are also accounts contrary to this what is true?
Bio-fuels is this feasible, not at current rates of production, the world needs to feed itself first before we power our cars with essentially food.

By death i meant it will become harder for everyone to afford, already some people are finding it hard to splash out money on car audio with the current rate, so as said it will be harder for the average person to afford such luxuries. What happens when the rates hit the $3mark or even more?
We might have new sources of energy within 2 years, but we may not and as is argued by some it won't be a while yet before there are feasible affordable sources of energy. This could be in 2020, but, in for example 2010 or even 2012 if we are still driving on petrol and it does cost $3+ I know me for one will not be able to afford car audio.

Solar energy panels at current rates are not feasible,
Sorry my mistake they may be in future but currently it has been discussed that they are too expensive alone this is. The other cost factor is that is cost a lot more than conventional energy, to provide not just to set up however there are examples which may work like Solar Thermal energy which may be ok, but the drawback is it needs to be close to users and a lot more research is needed.

When the Government puts the same subsidies on 'Green Power' solutions, such as wind and solar, as they currently do on fossil fuels, I'll consider it appropriate to change over.

Nuke power has already won the battle. Its the only real choice.

Worried about petrol price?

Dont drive or;

Trade a few long positions on the futures markets

I'm prob the only person in australia who loves paying 169.9 for ultimate

Airlines buy all there fuel the same way, in futures etc... although many of the futures that are currenty in place are about to finish there contract periods in the next yr or so, and guess what airlines will have to pay considerably more for there fuel then they currently are, so expect major air flight cost increases in the next year or so. Fuel and maintenance are an airlines two biggest expenses, so guess what prices go up, less people fly or airlines cut there ticket prices by cutting costs aka they winge to the government that they can't afford to pay there Australian maintainers (who get paid in Qantas's case a pitiful $18-$19 an hour, for a job in which they have the lives of thousands of people a day relying on there work skills) and say the only way they can keep operating is to send there maintenance overseas which is a VERY SCARY thought, which they know full well the maintenance will be dodgy with work claimed to be done but won't be, and they'll just play the risks that a major accident won't happen. Want to know why Qantas is one of the safest airlines in the world, because they are one of the only airlines in the world that doesn't contract there maintenance overseas or to a third party, although I believe they have trialed a few aircraft.

This thread is way off topic and really should be split and stuck in open discussion.

Petrol compared to the average wage STILL isnt the highest its ever been - in fact some may even argue that the price of fuel has remained low compared to the average wage too long and this is why we are feeling the effects so much now as the price of fuel slowly increases to the price it should be.

Solar cant be that expencive if something like half of Vegas is powered by solar. Sure solar panels are expencive but solar technology can be very productive given the right setup.

As Simon said when solar gets as much funding as fossil fuels the tables will turn.

Nuclear is a technology worth using - BUT we should make sure we are looking into other technologies also.

But then again I dont believe in global warming so what does it matter.

mods this is a great discussion and should be continued in open rant.

can someone arrange this please?

Nuclear energy is what I personally think is best, and the fact that it is the cheapest to supply, substantially cheaper than Solar. However there is too much opposition to it, and under the current government I don't think it's even going to get thought about.
Clean coal is also another option however it is said that there is no such thing as clean coal, even still this is supposed to better than untreated coal.

You may be right about more funding for solar, however so far I personally havn't heard of any studies that pick this as a real liable option. Unless it is coupled with other means of providing power as well. However if gov't funding will make a real impact and make this method feasible then it is fair to say the government is falling behind and should be looking at this more seriously.

Quick question Luke352 just wondering how much are flight prices expected to rise?

A note on the maintenance on the Qantas Aircraft, and also Jetstar. I believe they have started to send SOME of their aircraft for maintenance overseas, I don't believe it was a trial though I could be incorrect. No great surprise there have been a couple of issues that have arisen recently....

in their 2007 annual report they say that 90% of maintenance is done domestically

with the current exchange rate will the local audio prices be forced up?

The Aussie distributors will now have to pay more to import their products (which are sold in USD - im assuming) so then the retailers prices go up

This will also make the Grey market importers less competitive as their prices are up as well

I reckon we're screwed no matter how much we discuss it!

But if you have worked a way around the exchange rate problem we the desperate wholesalers would love to know.

Does this now mean cause the aussie dollar has fallen against the greenback that your prices will come down?

or will they go up?


(and this is not a personal attack Phil, just curiousity )

Course not.

He is more interested in working out excuses to increase price, rather then the passing on the true affects of differing crossrates

Dollar goes up, prices go up.
Dollar goes down, prices go up.

Phil's here to make money guys, don't expect him to give things away for free.
If you don't feel his prices are reasonable, don't buy his products.

ar3nbe I think that IS a personal attack and a bit harsh really, as all prices need to be set by manufacturers/distributors/retailers in order to balance supply and demand. No point selling at 200% profit margin if no one buys your stuff. Its the delicate balance that everyone in the economy works on. I too often struggle with the tenuous logic of Phil's micro and macro economics classes, but its pretty easy to understand that if the AUD loses 40% of its value in 6 months vis a vis a currency in which you deal in, retail prices will be adversely influenced.



and its "effects", not "affects"

People need to understand there are many things that cause prices to change.

Here are a couple of things to consider:

STRONG LOCAL CURRENCY

Semiconductors manufacturers and all Asian factories like to be paid in USD

Scenario 1 - Prices set at "X USD" exchange rate by O/S factory. They sell product for $100 USD and get $5000 Chinese rice cake dollars.
Scenario 2 - AUD & Chinese rice cake dollars become strong against the USD -$100 USD
Exchanging the USD now only gets you $2500 Chinese rice cakes instead of $5000 so factory starts to charge $200 USD for the same product to recover the 50% loss in profit.
Price goes UP for components

Part B The AZ amplifier company in Europe has a cost of components rise, he also sells in USD which he converts to Euro later, but the exchange rate is down so he gets less Euro per USD = Price Rise

Part C Shipping companies get worse exchange rate so pass on an increase
Part D Australia gets slugged with a new price list from 1) The factory 2) The shipping company
Part E The cost of product goes up in Australia.

WEAK LOCAL CURRENCY

We buy in USD or Euro so if we pay our bill for $50,000 USD at an exchange rate of 0.90 then the goods cost $55,555 AUD
If we pay our bill of $50,000 USD at an exchange rate of 0.65 then we pay $79,923 AUD

That is a 30%+ INCREASE IN THE LANDED COST.

So you expect the wholesalers to absorb this expense ? Not likely, we are here to make money not to act as a charity, I dont have a problem if you cant afford my product, it's life - not everyone can afford a Ferrari many simply have to settle for the Punto.

So now I have explained for the benefit of all and one loud mouth in particular how it all works.

We aim to be competitive in our pricing and if we have a better buy price we pass it on.

So ar3nbe this is where class ends - stop acting the fool because economics in the real world just wont match your "Paul Keating" fairy land model.

My suggestion is you contact Canberra and offer your expertise to solving the current world crisis ( I think you and Swan may be on parr).

Phil,

If the USD drops against the AUD and CNY,
then althuogh the US cost price goes up, so too does our margin due to favourable exchange rate.
These two would generally cancel eachother out, negating the need for a price rise.

Either way, you are in it to make money. If your prices are too high, you will soon find out, and the market will no longer support you.

Ahh fun and games

The flaw in that logic is that everything rises and falls at the same rate - which is not quite the way it happens.

It is generally at the top of the exchange cycle that manufacturers raise their prices which is generally the time dealers are asking for better buy prices so they can recover lost marginns due to price wars and the impact of discound chains and simple bad management skills, so it is very complicated.

But your right the market will ultimately dictate the price and if we are too expensive and cant lower our prices then we shut shop or go bust.

I suppose if I layed my spread sheet out it would make sense but that is never going to happen is it.

your second scenario phil, where a weak AUD causes the prices of imports to rise, is entirely reasonable.

However, the second scenario suggests a weaker USD versus its other trading currencies, AUD included (which is what we saw in 06-08, before the current changes) is questionable. Each part of the supply chain gets paid in their own currency. So:

where USD<other worldwide currencies we have

Chinese parts manufacturer sells to Euro amp manufacturer. They both deal in USD, and the USD goes down against the Yuan and EUR. Net result? The real exchange rate between the two parties changes very little. Yes, the nominal USD value changes, but not the real value, as both parties are "up" against the USD.

Shipping occurs, so there may be some increase in real price here.

Amp importer/prospective national economics advisor receives amps here with a slightly higher USD price tag attached.

the USD has fallen however against the AUD, taking the sting out of some of the higher price tag. End result, much chest beating and clammering, and possibly a small movement upwards in australian retail price. Or, depending on the exchange rate between usd/aud and the willingness of the importer to pass on those savings, a possible lowering of price.

My point? it is the final exchange rate difference between the exporter and importer of the good that will determine the retail price change more than anything else, as the combination of factors involved with globalised production should work to smooth out price fluctuations at a manufacturing level. Thus, where the AUD is performing very strongly against the USD, australian consumers are quite right to ask "are you going to pass on the savings".

And vice versa. AUD drops - prices of imported goods go up. Shouldn't this process also be sujected to the same logic though?

Matt VIP - Firstly thank you for at least reaching out to undersatand and applying some though unlike another person with a hair trigger typing finger.

Its hard for the majority of people to understand however the simple reality is I (and other wholesale companies) see the fish bowl from the inside, you guys see it from the outside.
Its two different perspectives.

It is the viability of the market that will dictate product prices, if at bottom margin levels sales halved we would have to increase prices to make enough to cover costs, if the increase further hurt sales well we would simply sut the business.

There are costs associated with running a business that are simply outside the movement of the dollar that play a big factor, the dollar seems to be a trigger point for it all though.

Here is a new one, I wanted a dump bin delivered, I rang my usual helpful guy and he tells me it was $100 now its $180 - I said thats BS an 80% increase in 3 months!
He said well fuels up, insurance is up, Work Care is up, truck prices are up and the council have introduced a charge that now slugs everyone $50 if the bin is placed in the street, and after 3 days there is a further $16 per day charge.

I don't think we will really see prices rise...

I work for an IT company and we often import servers from the US. Now, fair enuf the Aussie dollar has gone to crap...but don't forget that the US is essentially in a recession now. A lot of suppliers are quite keen to liquidate stock to simply get it out of the door...so we are seeing some pretty good prices on the high end servers we deal with. Whether or not this will flow into car audio products, i'm not sure... But it's just my experience and views on the matter...

What about DD are there prices going up ?

I'd love to comment there but I won't - any way how he runs his business is no concern of mine.



All my products come out or Europe not the US but we pay in USD, secondly there are virtually no manufacturers in the USA anymore - most are rebadged ex China - Korea etc.

Man!!! Just checked out the AUD to USD exchange rates.... Looks like the Aussie dollar is getting even worse..



Luckily I bought of of my stuff from the U.S. a couple of months ago when it was almost dollar for dollar, or I probably would have had to pay a lot more (relatively) for it now I guess...

Maybe it's time I started cashing in all of this U.S. money I gotz laying around I suppose...

.....

That is a further 15% slide - prices may be set to rise even further.
However we will wait over the next week or so and see where the dollar ends up.

I was speaking to an accountant about this issue, he basically said this,

Import goods at a price = selling at a fixed price until all the goods are gone from that batch.

Importing a batch of goods can increase the price incomparison to the previous batch but at no time during the selling of a batch of goods is it kosha to raise the price due to this single factor.

Plainly and simply the effect of the rising and falling of the dollar doesn't impact the price of a given product if it is already bought.

FOR CHRIST SAKE IS THERE ANYWAY WE CAN LIMIT ACCESS TO THESE FORUMS TO KEEP THE STUPID OUT!