The Government only originally planned to give the RBA around $6 billion, but reportedly upped the payment after it was warned about United States economic policy and its effect on the AUD.
According to The Australian, senior cabinet members have been told the US could continue to inject money into its own economy for longer than expected, putting upwards pressure on Australia’s currency, which is creeping back towards parity with the USD.
According to the report, Australia’s central bank was set to receive $6 billion — with more cash added over time — but this was increased to the $8.8 billion injection Treasurer Joe Hockey announced yesterday.
The decision was made after Hockey and Reserve Bank governor Glenn Stevens returned from a global summit in Washington DC earlier this month where they met with US policy makers.
The United States has been injecting billions into its own economy by buying its own treasury bonds, and the timing of its “taper” of this stimulus has serious implications for global markets.
Interest rates in Australia have reached record lows, and the high dollar has been a major challenge for the construction and manufacturing sectors, as well as exporters.
Keeping the dollar low against the USD is essential as other sectors of Australia’s economy pick up the slack after decades of high resource demand, which is slowing.
There’s more at The Australian.
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