Exchange rates and expenditure of households with foreign-born members: Evidence from Australia

Abstract

We examine the impact of the depreciation of the Australian dollar (AU$) on the expenditure of households with foreign-born members (HFBMs) in Australia. Employing a difference-in-differences methodology and using the 2013-2015 Nielson Homescan Panel Survey data, we find that HFBMs spent more on food in 2014 and 2015 compared to their native counterparts. We verify our results for food and estimate the impact on total expenditure using the HILDA survey, a nationally representative panel dataset. We can rule out alternative explanations for our results such as differences between immigrants and natives in consumption of imports, income growth and price changes. Our empirical results provide insights on how exchange rate changes may affect immigrants differently than natives. Our findings are consistent with reduced spending by immigrants both in terms of remittances and in terms of travelling back to their countries of origin.