It may be time for the RBA to throw in the towel and call off the fight it has been having with the Australian dollar.
The RBA has long been stating it would feel more comfortable with the Aussie dollar hovering around the mid US80c mark, looked to be getting its wish a few months ago when it dipped below US87c.
It has since stubbornly rebounded to around US93c mainly off the back off very low interest rates in other major world economies and our relatively strong economy here at home.
The high dollar hurts Australian export industries such as commodities, manufacturing, tourism and education. Conversely however, it has kept inflation low and allowed the RBA to maintain record low interest rates for an extended period.
While the high dollar hurts local retailers, it may stimulate online shopping which boosts household spending.
Senior economist at AMP Capital Shane Oliver told The Age he believes the RBA should keep the gloves on and keep punching in its quest to lower the Australian dollar.
“They’ve lost the battle but they haven’t lost the war,” he said.
Mr Oliver said the RBA weakened its rhetoric when the dollar started to slide below US86c and inflation was higher than expected, but they might have to start going harder with it again.
“If the Aussie dollar doesn’t start heading down again they are going to have to adjust their rhetoric and become more aggressive in their jawboning.”
