The ABC has finally discovered the high value of the Australian dollar is more of an issue than just a simple race call at the back end of the news or a mention in the finance report.

ABC Radio’s AM got interested in the value of the currency this morning with the lead item containing interviews with the new Barnaby Joyce, Bob Katter, the Queensland independent who will say anything when his mouth wants to; and the man who would be Joe Hockey, the opposition’s finance spokesman, Andrew Robb.

He is actually the cause of the story appearing on the ABC because he issued a statement yesterday after federal Treasurer Wayne Swa appeared on on the ABC’s Insiders and warned the high value of the dollar would cut budget revenues.

The ABC reporter suggested to Katter, in particular, that the reason the dollar and interest were rates high  was because of our better-performing economy. This was simply ignored by Katter in a stunning display of rural ignorance and condescension. So what were the contributions this morning from Katter and Robb/would-be Hockey?

“The country is going broke at a hundred miles an hour”; “the dollar down where it was in ‘Keating’s day’ to 60c”; “interest rates down to where they are in the rest of the world”  — today’s observations from Katter, who also said he was “not a fool”.

“Interest rates higher than they should be”, “we are penalising exporters”, “we are causing the exchange rate to be higher with our past policies”, according to Robb, who was wearing his Joe Hockey face mask as the acting-federal opposition treasury spokesman.

All as ignorant as each other. Both ignored the truth about the Australian economy for the sake of sound bites. Katter’s demands for a cheap dollar and lower interest rates ignores the fact that the Australian economy is doing better than elsewhere (a point he actually reflected in the interview, further highlighting his ignorance). Inflation in Australia is higher than anywhere else because those economies remain stuck in a growth rut, with high unemployment, low demand and hoping that exports can save the day. They have no inflation to speak of, in fact Japan has been gripped with deflation for much of the past 20 years.

Robb’s claim that the “exchange rate is higher than it should be” are similarly ignorant. He knows interest rates are higher here than in the US because our growth rate is more than double what it is in the US and Europe. Inflation is a sign of this faster growth in Australia. Would he prefer Australia have the unemployment rate of the US (9.6%), losing jobs, instead of creating them, with rising wages and incomes, not static or where about 20% of personal income in the US is coming from Government?

Another reason for the strength of the Australian dollar is that the currency is the fifth most traded of all currencies, the $A/$US is the fourth most traded pair of currencies and the Australian foreign exchange market is the seventh largest in the world. In other words, the Australian dollar is a traders’ delight, its easy to buy and sell and very easy to construct trading strategies involving it.

One such strategy involves hedging risk against China or commodity prices falling or going bad. Another involves the so-called carry trade where offshore buyers sell their currencies, usually the US these days and buy Australian dollars for the higher returns.

And it’s going to get worse as the US Federal Reserve moves towards another bout of easing that could total in the hundreds of billions of dollars. That will boost the value of currencies such as Australia’s because holders of US dollars will sell fearing debasement. Prices of physical commodities such as gold, silver, copper, and grains etc will also rise because holding them (or the right to buy) is a form of protection against the falling value of the US dollar.

That’s why commodity prices surged last week with the major indexes measuring them hit a two-year high on Friday. That also followed a gloomy report on the US corn and soybean harvests, and sent grain prices soaring around the world (European wheat prices jumped 10% on Friday). Australian papers ignored that development this morning.

That’s why Robb’s call yesterday for Swan to be more aggressive towards countries holding down the value of their currencies was silly in the extreme.  Australia is a price taker when it comes to currencies, not a price setter.

“The threat to Australia of a global currency war is twofold. Firstly, the printing of money in the US, Japan, Europe and other countries, to hold their currencies low, is harming our competitiveness and in the longer term will put upward pressure on global inflation and interest rates,” Robb said in a statement, according to The Age.

So how does he propose Australia be more aggressive? It smacks of ‘warning the Czar’ and the approach that Labor had in Opposition under Kim Beazley.

The only way of course for Australia is to have a strongly performing economy, with a currency that floats as freely as possible, with good, sound management at the fiscal and monetary levels of policy.

Katter’s way is rural interventionism that would bring a smile to Black Jack McEwen and the rest of the rural aristocracy. Robb’s is the way to nowhere.

And the ABC missed the big story from the federal opposition that broke on the front page of the Fairfax broadsheets. That’s because the interview was done on Sunday after Robb issued a statement commenting  Swan’s Insiders appearance. The interview and story on ABC Radio was done for the early AM edition that airs at 6.05am. That’s a pity because it would have been great to have listened to Robb tap dance around his explanation of the meaning of the word “audit”.

Peter Fray

Fetch your first 12 weeks for $12

Here at Crikey, we saw a mighty surge in subscribers throughout 2020. Your support has been nothing short of amazing — we couldn’t have got through this year like no other without you, our readers.

If you haven’t joined us yet, fetch your first 12 weeks for $12 and start 2021 with the journalism you need to navigate whatever lies ahead.

Peter Fray
Editor-in-chief of Crikey