Weaker dollar a wowser at the bowser

It's not just online shopping and overseas holidays that get more expensive when the dollar drops. For many households, a more immediate effect is felt at the petrol bowser.

And with some experts predicting the dollar has even further to fall, it may be hard to avoid paying more for petrol over the next few months.

Since hitting US$1.05 in April, the Aussie dollar had plummeted to about US92¢ when Money went to press. As a result, the Aussie-dollar price of fuel in Singapore - which sets retail prices - recently spiked to a five-year high. This is because fuel is traded in US dollars and these have recently become a whole lot more expensive for Australians to buy.

It normally takes about 10 days for these increases to be passed on to customers, so experts believe national bowser prices could soon also rise to five-year highs above $1.50 a litre. If the economists who are predicting further falls in the dollar are right, the increase could be even greater.

To illustrate just how much difference the dollar is making, analysts at CommSec said the pump price would have actually fallen slightly in recent months if the currency had remained at its April level of US$1.03.

"So what?" you might ask if petrol isn't a big expense for you. But as well as being an annoyance for drivers, higher oil prices can have a significant impact on the economy's overall health.

After servicing a mortgage, filling up the car is one of the biggest regular expenses for many households. Economists have estimated average use of 35 litres a week, or about $53.

It is also something that's very hard to avoid - people who need to drive to work can't cut back on petrol use just because prices have gone up. Therefore, big rises in the price of petrol can lead consumers to cut back on spending on other non-essential goods. This suggests more bad news for retailers.

And even if you don't drive a car, higher petrol prices can be passed on through increases in the cost of transport or things that need to be transported long distances, such as fresh food. In short, fuel is used in a large variety of goods and services, so it's hard to avoid these price rises.

Against the increases, however, it's worth remembering that pump prices are still well below the $1.65 record reached in 2008. Since then, wages are also up 14 per cent.

Economists also think the weaker dollar is doing more good than bad for the economy as a whole because it makes Australian exporters more competitive.

While frustrating, higher fuel prices caused by a weaker dollar are outweighed by more positive effects elsewhere.

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