The reporting of recent AUD strength is getting a little unbalanced. See here for an example.
This tone really gets to me. Movements in the foreign exchange value of the AUD (like movements in any relative price) create winners and losers. A stronger AUD typically will create losers among those who sell in foreign currency terms (a given amount of foreign exchange buys less AUD), and winners among those who are buyers in foreign currency terms (their AUD buys more foreign exchange).
The vast majority of Australians are consumers and the increase in the AUD has been the primary means by which their standard of living has been raised by the mining boom (fuel would be over A$2.5 per litre if the AUD was ~0.50, for example).
It is double counting in a sense, but i think it’s worth recognising that most Australian households are net debtors, and at least considering that rates would be higher if the AUD was weaker. The reason i say this is that the stronger AUD has been a part of the reason that inflation has been (and is likely to remain) very low. Thanks to the strong AUD, the RBA has been free to cut its policy rate.
So who loses – those that make their money selling stuff overseas. The vast majority of Australian exports are mining commodities, and the strong AUD is in part a reflection of these high prices, so it is doubtful that they are losers at all.
There are of course a few other losers – import competing industries have had their competition essentially ‘get a price discount’, and they are struggling. There are also some minor other exporters (manufacturing, for example).
If you work for one of these firms, you are probably at risk of losing your job, and that’s not a nice thing. No government could protect any industry from these relative price shifts – and it’s fair to note that is their good fortune to have this bad experience in an economy that’s doing pretty well … mostly thanks to mining … which is why the AUD is strong.
The complaint about foreigners buying our bonds strikes me as weird – since when has it been a bad thing that our credit is strong?
Why is it bad that someone wants to lend us money for 10 years at 2.75% (probably a zero real yield in realised terms).
The AUD moves to equate the excess Australian demand for foreign goods and services with the excess foreign demand for financial claims on Australia. The AUD is strong because we have lots of stuff that folks want to buy – and because of that, folks want to invest their capital in our strong businesses (or an average of Australian firms, which is what you get when you buy any Government bond as it’s a claim on future taxation revenues).
Yes, there are losers in this process – but every relative price shift creates winners and losers. I fear that (just like in the tariff debates) the concentrated ‘losers’ (the exporters) are getting too much pity.
The vast majority of ordinary Australians are winners from the stronger AUD. Even if it is partly by accident, it is nice to see the consumer join the ranks of the diffuse ‘winners’ – especially given that if follows decades where special interests were fattened by hidden taxes on consumers in the form of tariffs and quotas.
Why not three cheers? well, I hate to see anyone lose their job…