SYDNEY: The recent appreciation in the Australian dollar is not a problem at this point although a lower exchange rate would help the economy, the country’s top central banker said on Monday.
The Aussie has surged 24 per cent to the US dollar since hitting a low of US$0.5510 in March.
“At the moment, I think it’s really hard to argue that the Australian dollar is overvalued,” Reserve Bank of Australia (RBA) Governor Philip Lowe said in a webinar.
He cited better health and economic outcomes from the impact of the coronavirus crisis than other countries and strong commodity prices, with the downturn expected to be shallower than earlier thought.
Lowe’s comment further supported the Aussie which was last up 0.1 per cent at US$0.6841 after going as low as US$0.6801 earlier in the session.
Australia has been held up as one of the world’s top coronavirus mitigation success stories. In all, 102 people have died of COVID-19 in the country but it has reported no new deaths for more than three weeks.
Lowe said a rising currency could become a problem at some point, “but I don’t think we’ve reached that point yet”.
Australia has “a fantastic set of underlying fundamentals”, Lowe said as he upgraded his estimate for employment. Hours worked in Australia are now expected to fall 10 per cent from the RBA’s previous estimate of 20 per cent.
The RBA was still prepared to do “whatever it takes” on policy to boost growth, jobs and inflation, Lowe reiterated, having slashed interest rates to a record low 0.25 per cent in March.
Lowe said it was likely interest rates would remain at current levels for years given the disinflationary forces in the economy.
“We do face a world where there’ll be a shadow from the virus that will last for quite a few years,” Lowe said, pointing to the need for fiscal reforms and technological innovations.
“I fear if we don’t leverage the advances in technology, and we don’t see policy reform we’ll just…meander and kind of have slow growth.”