The risk of budgets failing isn’t always down to poor planning, sometimes, it’s the strength (or weakness) of the dollar. At the start of 2025, we saw a continued fall in the dollar quietly causing a knock on effect by inflating the cost of imported goods and services. This adds pressure to government projects to be completed within their budgets.
Combined with global volatility from reliable trading partners like China, Europe, and the USA, procurement programs need to adjust to accommodate market swings. Recent Australian forex trading statistics show how currency fluctuations have intensified over the past year, making accurate budgeting challenging. Quite simply, a forecast can be wrong almost overnight.
Overseas contracts will potentially be more expensive when the Australian dollar depreciates against other currencies. If this is not managed, then contracts and services priced months ago might be more expensive due to these currency swings. For those with fixed budget cycles, these shifts can erode funds and derail delivery times.
Currency swings are well-understood to government entities – but they have limited ability to manage it during the project. Under the Department of Finance’s guidelines, you need specific approval to engage in active hedging the currency risk. This rule does keep speculation out of public finance, but it leaves projects vulnerable to potentially undermine the project’s budget.
Instead, managers must find alternative, compliant ways to anticipate these currency exchange movements. To do this, it’s always best to negotiate contracts in Australian dollars – transferring the currency risk to the provider/vendor.
When dealing with foreign currencies is unavoidable, you can build exchange rate contingencies directly into the budget. This means building a buffer for currency movements based on realistic scenarios – just like you’d treat inflation and labour cost growth.
Another factor to consider is timing. Making large payments during less volatile periods can save on exchange rate fees. Alternatively, you can spread out payments, reducing exposure to sudden spikes and averaging transaction costs.
To make this easier, you can use forward contracts that lock in an exchange rate for a future date, (after seeking approval from the DoF). This way, you can secure the transaction knowing precisely what your costs will be to ensure you remain within budget.
According to Justin Grossbard, co-founder of CompareForexBrokers, the optimal way is to consider multiple outcomes ensuring the project’s budget is protected. Justin states:
“Even small currency swings can impact complex procurement chains. You need to monitor key pairs and run scenario analysis early to give project teams a head start in decision-making.”
It’s not about being perfect, but about planning for the potential outcomes. So, treating currency exposure as a routine part of project planning will strengthen accountability and shield public money from preventable costs.
Learn more Forex trading statistics at CompareForexBrokers.com.
