Economists warn a rising Australian dollar is good for importers and Aussies travelling overseas, but many local businesses, especially exporters, are going to be hit hard.
The local currency hit 110.10 US cents on Monday morning - its highest level since the fixed exchange rate era ended in December 1983.
The Australian dollar has gained more than 12 US cents in just over a month on the back of rising commodity prices and the widening gap in official interest rates in the US and Australia.
Australia's current cash rate is 4.75 per cent, while the US rate is set in a range of zero to 0.25 per cent.
AMP Capital Investors chief economist Shane Oliver said a strong Australian dollar helped household because it meant lower prices for anything produced overseas.
"That includes things like clothing, cars, electronic goods, household appliances, overseas holidays to name a few," he said.
"Basically Australians are seeing rises in their living standards on the back of this.
"It's effectively a translation of the mining boom though to our higher living standards."
However, Dr Oliver says a high local dollar hits some local businesses hard.
"The main losers tend to be businesses that export or compete with imports, or might have overseas operations, but report in Australian dollars," he said.
"The broader impact is (on) companies that export or compete with imports, so primarily that's the manufacturing sector.
RBS Morgans analyst Richard Ivers said the high Australian dollar may be good for consumers wanting to buy an imported piece of electronic equipment, but wasn't good news for the retailer.
"The market is so competitive out there that it is hard for retailers to increase their profit margin as the cost of the goods that they are purchasing is decreasing," Mr Ivers said.
"So they have to pass on that benefit straight to the consumers and it's very hard for them to get sales growth when the price of goods are declining in the order of 20 to 30 per cent.
Mr Ivers said the rising Australian dollar would help local travel agents such as Flight Centre sell more overseas holidays.
"They have a small amount of offshore earnings, so that's negative for them, but a large part of their earning are Australian and the high Aussie dollar is helpful for overseas holidays and I'm sure they are doing pretty well at the moment," he said.
"Although there is a fair bit of movement to international travel, I don't know how long that would last for."
PwC global head of industrial manufacturing Graeme Billings said the strong local currency was a real challenge for Australian manufacturers.
"It pushes down import prices, making them cheaper, so there is direct competition there - imported products against locally manufactured products," he said. "In the export scenario it increases export prices, making it hard (for Australian manufacturers) to compete internationally.
"One of the challenges for Australian manufacturers is to identify new markets and push the product globally and it's very difficult when you've got a very strong Australian dollar," Mr Billings said.
CommSec chief economist Craig James said the high Australian dollar was also good news for motorists.
"Exporters and investors may not like our soaring currency, but the Aussie dollar is clearly the motorists friend," he said.
"According to the Australian Institute of Petroleum, the national average Australian price of unleaded petrol rose by 0.5 cents per litre to 144.6 cents a litre in the week to May 1.
"If the Aussie dollar had remained at parity with the greenback as it was at the start of 2011, Aussie motorists would now be paying more than 11 cents more per litre for petrol," Mr James said.
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