RBA governor happy to see Australian dollar hit US 85c

The RBA governor Glenn Stevens has said he wants the sliding Australian dollar to continue to fall until it hits around the 85 US cents mark. 

The currency fell below the 90 US cents mark this week, and Mr Stevens told The Australian Financial Review that he would prefer a lower Australian dollar over lower interest rates as a way to stimulate the economy.

“To the extent that we get some more easing in financial conditions, at this point it’s probably more preferable for that to be via a lower currency at the margin than lower interest rates,” he said. 

“I just think that if things over the medium term evolve as we’re presently assuming – and I think it’s reasonable to make these assumptions – it’s going to be surprising if a nine at the front is the right number.” 

Mr Stevens said if a lower Australian dollar was to stimulate trade exposed sectors of the economy, it would be necessary for the depreciation to create a real wage cut. 

“If we’re thinking about the exchange rate playing a role of imparting stimulus to some sectors of the economy that have been struggling by improving its competitive position, that only works if it’s a real depreciation,” he said. 

The comments come after a surprise jump in the number of full-time jobs. 

The figures, despite the unemployment rate rising to a four-year high, suggest the labour market might be stabilising.


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