The Reserve Bank of Australia finally appears happy with the level of the Australian dollar, as governor Glenn Stevens’s main concern has now switched to long-term growth trends and the need for fiscal reform. Australia’s secular slowdown, and the reasons for it, took centre stage at the governor’s annual address to the Anika foundation in Sydney this week.
The relative strength of the Australian dollar, for about a year worthy of special attention in central bank commentary, was barely mentioned in passing. Mr Stevens noted that although the high dollar had hitherto held back the non-mining recovery, the necessary adjustment to its value “seems to be occurring, with relatively little disruption, and is having an expansionary effect”.
This official view of the currency has changed substantially in just over a fortnight. As recently as the minutes of the RBA’s July 7 board meeting, released on Tuesday, Mr Stevens had continued his “jawboning” of the Aussie, noting that its depreciation on a trade-weighted basis had “offered less assistance than would normally be expected in achieving balanced growth in the economy”. He said further depreciation “seemed both likely and necessary”.