Effects of Exchange Rates on World Prices of Australian Wool

Australian wool producers are being told that exchange rate have driven systematic fluctuation in the price of their wool at auction. This paper presents some key findings of a major collaborative study on the effect of exchange rates on Australian wool prices with the Economic Research Centre at the University of Western Australia. The effect of the exporter and importer’s market powers on the extent of price changes due to exchange rates, was analysed using Australian Bureau of Statistics wool trade data. The results reflect the extent to which Australian wool exporters or importers of destination countries have “market power” that can be used to their advantage in the form of increasing prices.