Is The Lower Dollar Doing Australia Any Good?

The Australian dollar has dropped by around 25 per cent since its 2011 peaks — some 30 cents or so — an event widely celebrated among policy circles and some in industry.

Indeed, official attempts at lowering the dollar have been extremely frequent. The government (both sides of politics), the RBA, Treasury and a number of economists have all called for weaker currency and actively pursed that outcome. The hope was that a lower dollar would help rebalance the economy and in particular, help lift the currency-sensitive industries — manufacturing, tourism and education (via exports).

However, the costs associated with the exchange rate target have been significant. Monetary policy has been completely hijacked by the currency concerns, while, conversely, issues to do with financial stability and inflation have been given secondary consideration. In trying to achieve this outcome, policymakers have had a clear and unequivocally detrimental influence on business and consumer confidence, creating, whether deliberately or not, a sense of perpetual fear throughout the nation.

Unfortunately the evidence doesn’t suggest a weaker currency has done much good in terms of lifting those currency-sensitive sectors. Indeed it’s quite clear the program has been a complete and utter failure.

http://www.businessspectator.com.au/article/2014/12/29/australian-news/lower-dollar-doing-australia-any-good

This news story is reprinted from

www.businessspectator.com.au

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