AMP Capital’s chief economist, Shane Oliver, said that in the current environment, with equity markets set to “remain rough”, a falling Australian dollar will help both the economy and the share market.
“I have to be humble and admit I don’t have a clue how low the [Australian dollar] will ultimately go,” he said, “but my analysis indicates that – in the context of commodities being in a long-term downtrend, the Australian economy struggling and the interest rate gap in favour of Australia likely to narrow further – the [Australian dollar] has a lot more downside.”
The dollar is currently down 37 per cent against the US dollar when compared with its 2011 high.
The falling dollar is helping to drive tourism, both local and international. “It’s [also] turning Australians off their love affair with shopping overseas which is good for our retailers,” Mr Oliver said.
“Manufacturers who survived the high $A years will likely now survive and hopefully prosper and farmers and miners will get a benefit when their $US earnings are translated back into Australian dollars.”
At the same time, Mr Oliver said, the fall is not causing a surge in imported inflation.
“So on balance, a lower $A is just what Australian needs right now to help rebalance the economy in the face of the mining downturn,” Mr Oliver said.
