I’VE got bad news and good news. The bad news is you missed the best time to hit up the USA. The Aussie dollar shot up above 80 US cents back in July and again in September. America was — briefly — cheaper for us.
Since then the Aussie dollar has fallen like Donald Trump’s approval rating. That means we lost five per cent of our LA buying power and New York is now five per cent more expensive than it would’ve been if you went in their summer. You can see the rise and fall in this next graph.
The exchange rate is our ticket to the rest of the world. Back in 2011, when our currency was worth over a US$1 dollar I hit up the west of the USA. America’s an incredible destination. For a while there it looked like it was about to get more affordable again, and I was excited. But with the latest slump it’s more expensive again.
In the past six months our dollar has risen then fallen against a whole lot of countries. You’ll find the same pattern for the Thai baht, the Swiss franc, the British pound, the Korean Won, and many more. If you were browsing your options a few months back they’re all going to be pricier than you thought
The good news is there is still one holiday destination out there that’s cheaper than ever. I’ll tell you what it is in a moment. First, the reason why our dollar is down in the dumps all of a sudden.
The level of the Aussie dollar is related to our interest rates. When rates are high, investors want to invest here, so they buy up Aussie dollars and our dollar goes up. When our interest rates are low they sell AUD and our currency falls.
At the moment, our interest rates are at a lowly 1.5 per cent. At the Reserve Board Bank meeting on Tuesday they made it clear there’s no sign of them going up soon. That keeps a lid on our dollar.
There’s plenty of reasons they won’t lift interest rates any time soon: inflation is low, wage growth is terrible, underemployment is rampant and consumer spending is weak. (Not to mention that if they did raise interest rates it could do dangerous things to our housing market.)
All that keeps a lid on our currency and makes the rest of the world more expensive to visit. This is totally deliberate — keeping interest rates low is meant to tempt us to spend our money here, onshore.
THE GOOD NEWS
If we’ve had a bad run on the currency front, New Zealand has had it much, much worse. Their dollar has sunk like the Titanic. It makes it a lot cheaper for us to go there than it was six months ago.
It’s absolutely charming over there. New Zealand is geologically very new, while Australia is geologically very old, so their mountains are taller and sharper than our old eroded ones. It makes for some really beautiful landscapes. They have a lot of active geysers and volcanoes too which are exciting, albeit odoriferous.
To be clear — this is not some sort of ad for New Zealand. Although I recently found out I have NZ citizenship via the inheritance rules, same as Barnaby Joyce, so I should probably declare that I am a technical citizen of Aotearoa and if I paid some money and signed some forms I could get a Kiwi passport.
The great thing about a trip to NZ is the flight is short. If you go all the way to New York for just a week you’re going to spend around two days on the plane and another two feeling badly jet lagged. You get maybe three good days out of a seven-day jaunt. But when you land in New Zealand it’s scarcely much later than when you took off.
Don’t be mistaken into thinking it’s just a smaller, worse Australia. The cultural differences are real. Ask for some lolly cake and get ready to have your mind blown. They put cheese in their meat pies. They don’t have strong flat whites … because the flat whites are all strong. You’re not in Kansas any more.
And even though that’s because you can’t afford Kansas, it could be for the best.