The AFR has some quotes from Matt Sherwood, senior economist at Perpetual, that are of interest:
“The RBA’s war against the Australian dollar — and its desire to get it lower — has been lost…Indeed, over the past 18 months the bank has been telling us that the Australian dollar is historically high and is at levels that are tightening financial conditions.”
But Shane Oliver, senior economist at AMP Capital, disagrees the RBA has lost its ability to push the Aussie dollar down.
“They’ve lost the battle, but they haven’t lost the war…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,” said Dr Oliver.
Kudos to Sherwood for putting the currency in the right context. But Oliver is right, the RBA hasn’t fired a shot. All it has done is cut interest rates in line with domestic activity and jawboned for a few weeks.
Compare that with the Swiss peg to the euro and pledge to print and keep it there, Japan’s or the UK’s whirring printing presses, or even NZ’ macroprudential rules which have prevented more rate rises.
It is Australia that is losing the war because the RBA won’t fight.
