Feb 21, 2013

The currency wars: how the mighty A$ is quietly shaping politics

The strong A$ is the elephant in the room of Australian politics, although Wayne Swan is now paying more attention to the productivity challenge posed by the currency wars. What can he really do about the gold-plated dollar?

While the media obsesses about the Labor leadership and the election, the strength of the Australian dollar is a key unacknowledged factor currently shaping politics.


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14 thoughts on “The currency wars: how the mighty A$ is quietly shaping politics

  1. cairns50

    thanks for your inciteful article my question is why dont truthful articles like this get published in the main stream press ? the answers simple they dont want to publish any article that might reflect any good on this labor government

    thats a disgrace and imbiciles like hockey get quoted every day in and out bagging our economy,as a consequence of this misinformation and probably brain washing , most of the public beleive that our economy is in dire straits

    its unbeleivable that this can happen in a so called democratic society but thats what has happened

    simply the australian public is not being told the truth

    the main stream mediac, murdoch dominated aided and abetted by the right wing rednecks has taken over the information stream in our country

  2. Liz A

    Excellent commentary Bernard. Thankyou!!


    Calls for protectionism come in all flavours, and the cries of the currency warriors is just another one. Capitalism must face adversity to evolve, and a stint with a high dollar will do much to rid us of unproductive enterprises and actually boost productivity.

    I thought higher productivity was what everyone says they want? But is that only if it’s by screwing wages?

  4. mattsui

    I wonder what the new Japanese finance minister had to say at the g2o? Since returning to government in December his government has vigorously attacked the value of the yen, bringing it down by around 10%. Positive results are already being felt – at least in terms of confidence.
    It’s probable that a mere change of government at home will have a similar effect on the Au$, especially if Hockey goes a head with some of his more irrational plans (undoing the price on carbon is sure to cause some uncertainty and lead to a leaching of confidence in currency buying circles).

  5. Warren Joffe

    What do you think BK of Peter Jonson’s suggestion (in his Henry Thornton blog) that there should be some sort of tax on short term foreign deposits in Australia? Maybe on bond purchases too, I forget. As he was once Chief Economist of the RBA that is surely worth thinking about and would have the advantage of bringing in some much needed revenue.

    BTW don’t Hockey’s appearances on TV now give you some comfort and reassurance compared with what you might have thought a couple of years ago? He seems to be well briefed and realistic about the economy. What you cite in your article is just Hockey playing standard politics I guess and, all things considered right now I don’t see much down side for him in playing it like that.

  6. michael r james

    [The G20 declared in its communique that it “will refrain from competitive devaluation … [and] will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open”.]

    [(G20): The ministers also pledged to crack down on tax avoidance by multinational companies.]

    These statements raised an involuntary and weary snicker. The world’s top three economies (USA, China, Japan) are engaged in overt or covert currency manipulation, and two of them are Australia’s top two trading partners (and some of our key export commodities are priced in US dollars). We can only lie back and dream of … Hayek?

  7. grubbidok

    The manufacturing sector is just as pummeled by an inflated property sector that puts increased overheads on retailers selling their goods or manufacturers making them as it is by a high dollar. But no-one in politics wants to talk about that.

  8. drsmithy

    What we should be doing is printing as many AUD as the crazy foreigners want, then using the money they give us to purchase foreign assets.

    That or a Tobin tax, so we can at least derive some small benefit from our currency being treated like the town bicycle.

  9. Mark from Melbourne

    Whilst the government deserves to be held to account and could do better, I cant help but think that Abbott, Hockey, Bishop, Mirabella, and the Nats are a very weak and worrying team to lead Australia. God help us all…

    Even Malcolm is a concern as he has failed to show much backbone.

  10. Ian

    A currency war is in full swing whatever the motivations of governments might be. The northern hemisphere’s developed economies are riddled with debt – governments, banks and individuals – and it is hard to see a way out of it all. Slashing interest rates and printing money (getting out of the debt problem by creating even more debt) can’t be the answer.

    Australia like many non-core countries is caught in this web and it is difficult to see an equitable way out of it.

    If we start slashing interest rates and creating more and more money, I believe we will join the downward spiral being experienced by others. China can’t prop us up forever. Don’t forget that cutting interest rates has two sides to it represented by the savers and the borrowers (who may or may not invest their borrowings in productive activities). There is also a redistributional effect in cutting interest rates and the added high risk of causing asset bubbles (again with a redistributional effects).

    Unfortunately Australia has embraced this free market/free trade + privatization policy unquestioningly and has, as a result, created an economy that is extremely fragile being, as it is, so reliant on mining, including of its native forests. Our manufacturing industry is gone, agriculture is suffering, notwithstanding high world prices for grains, and now the high dollar is even hurting the not-so-profitable-85% foreign owned mining industry. The high dollar as I noted earlier is partly a result of the currency wars but also, especially early on, tied to the resource boom.

    Every time mention is made of imposing import duties there is an outcry… we’ll start a trade war. Really! And similarly if mention is made of imposing some sort of capital controls all hell breaks loose. Why? Surely we should try something different for a change if the system we have been working under for so long is breaking up and has left us so vulnerable.

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