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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