The impact of exchange rates on expat Brits living and working in Australia

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For most people, fluctuating exchange rates are little more than a minor irritant. They can mean you get slightly less foreign currency to spend when you’re on holiday, or a bit of a bonus if you get more than you were expecting.

But if you’re living and working in Australia, with substantial financial arrangements still tied up in the United Kingdom, they can have a big impact on your financial affairs. They should also be a consideration for anyone thinking of going to work overseas for an extended period.

For example, the value of the Australian dollar hit a four-year peak of 2.06 to the UK pound on 2 April 2020. By 22 July, it had fallen to 1.78 – a drop of 13% in less than four months.

By early August, the value had risen slightly, to 1.83. But that still means a drop of 11% from the April peak, and means you’re getting 11% fewer dollars for your sterling.

Fluctuating exchange rates are nothing new, and a whole variety of external factors cause them. The current economic climate is almost unprecedently unstable, with the Covid-19 crisis coming on top of the ongoing impact of the China versus US trade war.

On top of that, exchange rates can be directly impacted by the relative economic health and outlook of the two nations concerned.

For example, the uncertainty of the impact of leaving the European Union, on top of the economic standstill created by Covid-19, means an overriding climate of economic insecurity in the UK. So, it’s no surprise that there is an impact on the relative value of the pound against other currencies.

But, even in periods of relative economic calm, exchange rates can fluctuate. The table below shows the highest and lowest dollar to pound exchange rates in each of the last ten years.

2Source –

Even in the calmest year (2018) the exchange rate varied by 7.5% across the twelve-month period.

To put this in tangible terms, on 2 April 2020, a fund of £50,000 would have bought $102,000. Less than four months later, the same amount would only have bought $89,000.

The Australian inflation rate is currently 1.9%, but for anyone exchanging pounds for dollars, it was effectively 13% as their purchasing power was reduced by that rate.

Low exchange rates aren’t all bad news

It’s worth mentioning at this point that low exchange rates aren’t all bad news for expat British people living in Australia with assets still tied up in the UK. A lower exchange rate makes it cheaper to buy sterling with Australian dollars, therefore making it beneficial to use Australian currency to pay off any residual debts in the UK or send money home to family remaining there. It also makes importing goods to the UK cheaper.

It’s a ‘swings and roundabouts’ scenario that the well organised and financially savvy can exploit to their advantage. It’s worth taking some time to gain an understanding of the economic impact of exchange rates, and how, at a micro level, they can affect your financial arrangements if you’re living and working in Australia with substantial financial arrangements in the UK.

As with stock markets, it’s impossible to time the market exactly – but it does demonstrate the vital importance of monitoring exchange rates regularly, and being aware of potential financial and political developments that could have an impact on them – both positively and negatively.

If you are going to be exchanging pounds for dollars regularly, it’s worth setting up a trading account with a reputable money transfer company, if possible, as commercial exchange rates tend to be better than tourist rates.

If you’re making ad hoc exchanges, make sure you’re comparing the rates on offer and shopping wisely. Just a cursory glance at current rates offered by selected currency exchange companies showed GBP to dollar rates varying from 1.83 to 1.77. That’s a difference of 3.2% – which can have a big impact if you’re exchanging a large sum.

As a cross-border financial planning firm with offices in both the UK and Australia, we’re uniquely placed to help you with your emigration financial arrangements, from initial plans, to move, to transferring your finances from the UK to Australia.. Get in touch to find out how we can help.