The physical law that states for every action there is an equal and opposite reaction can be applied to any number of realms beyond physics, and surely most economists would agree that the physical law is aptly applied to the world economy, international trade and currency movements. As Dymphna Boholt explains, there is a ripple effect that has an impact far and wide, with changes in currency valuation abroad affecting small businesses at home.
In Australia, Boholt notes, the strength of the economy is a product of the country’s overall prosperity and the consumption that naturally comes along with a certain level of prosperity. Since the economy is so large in spite of its relatively small population, Australia has to rely quite a bit on the importation of goods from abroad to make up for its lack of economic diversity. As a result, a lofty currency valuation of the Australian dollar benefits the consumers purchasing goods or services from outside the country. The opposite reaction, however, is that foreign consumers become less likely to buy goods or services from Australian businesses due to the unfavorable exchange rate.
Small businesses have to be aware of how this relative cost structure will affect business performance, growth and long-term viability. It is surely the case that some businesses will be more likely to experience an adverse effect on performance and growth due to currency movements than others, but every small business should engage in a thorough evaluative process to ensure the business is insulated and secure in the event of any shifting currency movements. This is simply good practice, as it is always best to be prepared with a plan based on a wide range of potential circumstances.