Strong Australian dollars could hit budget: Treasurer

08:53, October 11, 2010      

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A stronger Australian dollar could undermine commonwealth budget revenue and hit local company profits, Treasurer Wayne Swan said on Sunday.

The Australian dollar reached a 28-year high of 99.18 U.S. cents on Thursday night, but market watchers are expecting the currency to reach parity with the greenback.

According to Australia Associated Press, while a strong Australian dollar makes imports and overseas holidays cheaper, it also makes exports more expensive.

The Australian manufacturing, tourism and farming sectors usually suffer when the currency is more expensive.

Swan rejected to speculate on likely currency movements, but said the government was weighing up what a strong Australian dollar could mean for tax revenue if company profits fell.

"There may be some impacts on the downside for revenue, we'll just have to wait and see as we prepare the budget what the overall net impact of that is," Swan told ABC Television on Sunday.

"There's no doubt that a high dollar will impact on company profitability."

Swan indicated that company tax rates should be cut to make them more competitive, in order to help industries adversely affected by a strong Australian dollar.

He also advocated investment in infrastructure and skills.



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