Tim Hennessy
Eclipse Textiles, owner. Eclipse Textiles is a leading national and international fabric wholesaler, specialising in stretch fabrics for a variety of apparel sectors.
Catherine Manuell Design
Catherine Manuell, owner. Catherine Manuell Design is an iconic fashion brand specialising in colourful luggage, handbags, executive range, scarves and other accessories.
Woolmark
Dr Paul Swan, Woolmark market intelligence manager. Woolmark is one the world’s best known textile fibre brands, owned by wool textile organisation Australian Wool Innovation.
The strong Australian dollar is certainly seen as a friend as the majority of our products are imported or manufactured from imported components and allows a lower cost of goods, allowing us to be more competitive in a highly competitive global market place. The strong dollar has allowed us to absorb, at least for now, rapidly and ever increasing raw material costs which would have increased prices dramatically had the dollar not been so strong.
We generally need to price our fabrics for a complete season to allow our customers surety on pricing; we suffered huge losses in exchange rates during the latter part of 2008 and the GFC. Our lesson from that difficult period was to ensure we manage the dollar with forward exchange contracts to protect our pricing to customers for up to 12 months. While we do this, there is a cost involved and we don’t benefit from the absolute highs the dollar experiences, we achieve a more balanced effective exchange rate which is important as the Australian dollar is highly volatile. The high Australian dollar also presents challenges for our expansion programmes outside of Australia and we have had to review these, as well it puts pressure on our customers who export. The current exchange rate is also putting pressure on our local retailers as consumers are turning to the internet and taking advantage of the currency position to buy online from overseas, which has a trickle effect from retail, to the garment manufacturer right through to us the fabric supplier. The real position should be seen as a weak US dollar and Euro rather than a strong Aussie dollar. Currently I believe we have a window of opportunity with the dollar and smart businesses will be looking at three focal points towards the future: to improve quality, to improve efficiency and adapt to be globally competitive. I believe we can expect to have our current position with the dollar reversed within 18 months and smart businesses will plan for the challenges to come.
The rising dollar is both friend and foe to our fashion accessory business. The rising dollar has allowed us to create more stock on items that we produce overseas, within our seasons budget, which is very helpful. Although the costs of our materials have risen hugely, due to the dollar, we have managed to keep prices at the same level as last year. Sales, special offers and giveaways are also so prevalent at the moment in retail, the high dollar helps us offer some great deals, to help keep customers interacting with our brand. On the other hand, we do feel customers are making the most of the strong dollar and buying from overseas companies for many fashion items and overlooking home brands that so need support. Also selling to much of the export market that we have previously sold to, the USA, Japan, Europe, NZ etc) is far harder. Even if there is a strong interest to stock or distribute our designs, the hard economic conditions in many countries coupled with the price of our high Australian dollar goods, causes difficulties for them, and so we are finding this combination is delaying future growth plans for some of our export customers.
In short, Australia’s wool industry is very exposed to foreign exchange rate fluctuations, especially rising AU:US rates: Australia’s wool industry is an export industry – more than 95 per cent of our clip is exported. We represent a very minor consumption market for wool – around one per cent of the global clothing market, and around 0.6 per cent of consumer expenditure on wool clothing. The critical currencies for Australia’s wool industry are the US dollar and the Chinese Yuan – firstly since almost all export contracts are denominated in US dollars, and secondly, since around 70 per cent of the wool we export is destined for China. Australia’s dollar has risen dramatically against these currencies over the past decade: rising around 190 per cent against the US dollar (comparing July-May 2001/02 to same period 2010/11) and rising around 150% against the Yuan. The impact of the rising currency is to reduce the AU dollar value of the wool (the price growers receive) – this is because wool buyers tend to operate within price limits set in US dollars, driven by the export contracts they try to fill. For example, if the AU dollar remained today at around US$0.52 cents, as it averaged for the July-May period in 2001/02, the current price of wool (AU$14 per kilogram) would potentially be much higher – AU$27 per kilo. Thus, if we account for the changes in Australia’s foreing exchange rates, the increase in the value of each kilogram of Australian wool over the last decade has been remarkable.