RBA’s Harper: Australian dollar too high

See the latest Australian dollar analysis here:

Macro Afternoon

Via Bloomie:

Reserve Bank board member Ian Harper urged Australia’s government to come up with a “tapering arrangement” for its stimulus programs that are due to end in September, warning a sharp cutoff would damage the recovery and potentially drive unemployment even higher

“The strongest form of Cold Turkey would be to cut back to where they were before,” said Harper, one of six independent directors on the RBA board, who stressed he was speaking in a personal capacity. “That would have a significant negative effect on consumer confidence, on consumption behavior, and consumption’s 60% of the economy.”

…Harper said the government should be able to develop a form of fiscal support other than the current JobKeeper subsidy that keeps people tied to their employers, and assist others currently outside it, with a reduced rate of aid. He said if this is done, then the jobless rate won’t reach the worst predictions of 10%.

…“It would certainly be unhelpful if the [exchange] rate was back up over 70 cents, that’s for sure,” Harper said of the currency. “It might’ve been nicer if it was weaker for a little longer.”

Harper is a macro buffoon but both of those points are screamingly obvious.

It appears the RBA is back to its old tricks. Driving up the currency with horribly dated monetary tools and settings then whinging about the outcome.

David Llewellyn-Smith
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  1. RanganutsMEMBER

    Personally I love a high Australian Dollar. I bring in containers of components and *gasp* make stuff with it, so the higher the better! To the moon!

    • I believe you would like Luke Gromen’s work. He regularly suggests that the US will pretty much be forced to do that.

  2. I remember spending AUD in London at the rate of 1 aud to 1.64 GBP, Aus was doing fine at the time.
    I don’t see countries with weak currencies doing well. Countries with thriving economies have higher currencies.

    As it is with aud weak and bugger all domestic production everything costs we the people more. Australia has the real physical economy involving people, stuff, hassles of living, and the separate world of govt, financial analysts, market, banks RBA and such which is entirely self serving financial profiteering.

    They the financial lot dominate decision making which has stuffed us up with real economy having the diversity of Zimbawbwe. Which means we perish, doesnt Zimbawbwe have a satisfyingly low currency?

    • It’s fine to say that you like a high currency as long as you believe there is no structural problem with the economy. But as you say , we have the economic diversity of Zimbabwe. Given no economies in the Anglo world are managed with any competence any more so the currency is the only avenue to drive a more diverse economy. Case in point would be the car industry. A significantly lower currency means would would still have it. That or continuing support form govt subsidies.

      • A lower currency does not of itself create a more diverse economy.
        Exporting our production research cheaply, as example of the rejigged textile machines in the 1980s done by CSIRO and uni NSW, this and the equipment were sold to China for 100,000 K with the knowledge and jump started Chinas textile recovery and global takeover by 1990s.

        A lower currency would not have saved our tanning industries, best skins globally, 13 double doctorates sacked from CSIRO as a result of govt policy here. As a female occasional handbag buyer that was the end of it as imported leather from USA brands, others, 1500 to 3000AUD in David Jones stank due to poor tanning knowledge and skins rotting before tanning and the micro organisms persisting there after.

        Our economic diversity is a matter of govt policy. We have not faced the adversity Russia has, with 85% wealth divested in the 1990s and sanctions etc. and we have been crumbling year on year. My impression was a skilled workforce, smart economy, intelligent innovation at low cost to us from CSIRO were basic to improving our lot. Supported by an Australian bank funding infrastructure and such businesses as presently looking possible.

        I am not writing if the financial banking sector but if the real economy, Quite different. It’s stuffed and needs rescuing.

  3. happy valleyMEMBER

    An RBA board member just running cover for the RBA happy clappies who will soon say that negative rates are the only way to get the dollar down?