A strong Australian dollar is undoubtedly an Aussie traveller's dream but it also hails as an exporter's nightmare.  The rampaging Australian dollar is very close to parity with the US dollar, but is this a good thing or a train wreck waiting to happen. 

The answer depends on who you are and what you do.

Solomon Lew, chairman of Premier Investments, the owner of the Just Group chain of fashion stores said,"If I had to give an answer to the question,  'is a stronger Australian dollar good for retail', then the answer is yes, but it's much more complicated situation".

Indeed it is....everyone is facing interest rate rises as the Reserve Bank moves to stem the growth in income and demand in the resources sector that the strong currency reflects.  

A high dollar also lowers the price of imports competing against Australian manufacturers - in the car industry for example - and cuts the Australian dollar income of Australian exporters.

The miners are enjoying surging commodity prices and can therefore withstand currency fluctuations without it hitting their bottom lines.

But the soaring Aussie is pricing Australian manufacturers out of their international markets. The price they pay for imported components is falling, but not by enough to offset their sliding international competitiveness, and rate rises will just be another body blow.

The Minister for Innovation, Kim Carr, rejects suggestions there could be carnage in the manufacturing sector if the dollar continues to appreciate.  However, he acknowledges that local manufacturers are challenged by the dollar's rise.   He says the key is to arm them to find ways to innovate and respond. (Ed Note: So no help there then!)

The dilemma of the dollar's rise towards parity is that it means different things to different sectors, and even within them it can be simultaneously negative and positive.

Alan Joyce, the chief executive of Qantas, says  ''A higher Australian dollar encourages more out-bound travel.   But there's also a dampening effect on inbound traffic.   For key markets such as the US and UK, Australia has become a drastcally more expensive destination - and it doesn't help of course that those markets themselves are suffering from the economic effects of recession.''

However, Qantas gets a positive impact on its cost base. Fuel is priced in US dollars that are becoming cheaper, and it represents over 20 per cent of Qantas's cost base.

The Australian dollar has never achieved parity with the US dollar since it was freed to float on the currency markets by the Hawke government on December 12, 1983.  It has climbed from a global crisis low of just over 0.48 euro to currently more than €0.70.  The Australian dollar is buying about 60 British pence, up from a low of just 33.45 pence in late September 2001.

The Aussie dollar is being pulled higher by an international interest rate pathway that this week became even more compelling as our central bank signalled that rates here are set to rise again, and the US Federal Reserve signalled that it was preparing more monetary easing to shore up the US economy.

Asian growth and the commodity price boom it has triggered has been a big factor in the Aussie's rise.   However the biggest force behind the Aussie is the so-called ''carry trade'', which sees international investors borrow in their home markets at very low rates and re-invest in higher rates here. (Ed Note: It's extraordinary, bankers will always find a way of making money without actually creating anything except a paper trail!)

As the developed northern hemisphere countries struggle to re-ignite economic growth and employment, they are keeping rates low and printing and distributing free money - so-called ''quantitative easing''.  Not only the yen but the US dollar, the euro and the British pound can be acquired at rates of close to zero, swapped for Australian dollars and reinvested here, where the Reserve Bank's base cash rate is 4.5 per cent.

The Australian dollar's push up to US94¢ at the start of this week came as the US Federal Reserve kept its key rate at almost zero per cent and said it was ''prepared to provide additional accommodation if needed to support the economic recovery''.  The Reserve Bank Governor, Glenn Stevens, had also warned that the fact growth in Australia was concentrated in the resources sector would not prevent the central bank from lifting its cash rate to control inflation.

Everyone is going to be making adjustments if the Australian dollar does move higher. T o the men and women in the street, that adjustment is probably going to have to be another tightening of the belt whilst the bankers play the system and make even higher profits!

But what about the tourism industry.  Well the Australian Tourism market should be the first to react on this currency strength because the international travellers so adversely affected by the strength of the dollar are just not going to travel.  Therefore it will be the domestic traveller who is going to be the lifeblood of the tourism industry for a fair while yet.  It is importnat for those domestic travellers to be encouraged and incentivised to experience their own country rather than spend their hard earned dollars on cheaper international alternatives.  The message to the tourist bodies is therefore a very short but very clear one, stop spending money overseas and concentrate on the domestic traveller and we may yet see this through to a positive conclusion.  If these warnings are not heeded then our Mining industry may thrive but our tourism industry will die.