Unfortunately, I'm not yet convinced it will happen again like that though Heatho. The bulk of value-added stuff that we consume is imported because we don't make it here anymore so we'll likely have to pay more. Our exports consist largely of food and dirt and China's appetite for our dirt is leveling off - mining's contribution to our economy in normal, non-boom times is in fact smaller than the media has generally portrayed. It's a tiny employer, only 3% of the workforce at best. It is the enormous, unprecedented, decade-long boom in mining investment - the staggering sums of money poured into the construction of new mines and mining plant, railways, processing plants, smelters, ports and shiploading facilties and all the service industries that have boomed to support this that has added juice to economic growth. For every 10 jobs required (roughly) to build all these new things, only about 1 is required to operate it once complete. And we are well past the peak of the investment phase and heading down. By some estimates, mining investment reached close to 10% of the economy a short while ago - it's long term average is closer to 1-2% and that's probably where it will be again within a couple of years.
In theory, domestic manufacturers should gain a competitive edge against imports as the currency depreciates - but that assumes that we actually have all these domestic manufacturing industries ready and waiting to spring into action and expand their output. The truth is that many of them simply aren't there anymore.
I was just speaking to a bloke I know who has owned a retail business for many years (outdoor equipment) - last time the dollar plunged he found that for him it was offset by the fact that China was pumping out ever cheaper goods faster and faster and his import costs were falling fast enough to offset the falling dollar. This would have flowed on to pretty much everyone. But this process appears to have have reached a plateau. He says he has just had word from one of his main suppliers that costs are about to rise 10% due largely to the falling dollar, though this will take some time to flow on to retail.
The bottom line is that a low dollar is generally good when you are a net exporter and can produce most of what you consume for yourself. But when you import most of it, it is a high dollar that allows you to consume more for less and thus feel materially "wealthier".
So we now have a falling dollar and we have almost exhausted the other avenue for bolstering consumption - cheaper borrowed money. We now have the lowest interest rates in half a century and with an official reserve bank rate of a mere 2.5% we only have one more decent spurt left before we reach effective zero and we can't effectively make borrowing money any cheaper.
So while I hope I'm wrong, I reckon we are likely facing some stiff headwinds over the next few years :|
