RBA board member John Edwards: the Aussie dollar is still too high but the economy's looking stronger

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RBA board member John Edwards just appeared on the ABC talking to Ticky Fullerton, host of The Business.

It was a pretty upbeat interview, all things considered, but he did say that growth was “not fast enough to reduce unemployment” while highlighting that overall growth has been strong.

The key areas of optimism he said was that there was “good strength in exports”, pointing to machinery and farm exports, which he said were at new highs. Edwards was practically effusive when it came to service exports, saying “we couldn’t have expected the rate of services growth, around 14% over the past year, to be much fast than it has been.”

If you know John Edwards, you’ll understand how important a signal that really is.

Even though the Aussie dollar is still too high, Edwards said it was aiding in increasing growth because the lower rate, coupled with lower wages growth and increased productivity, was working together to improve Australia’s competitiveness.

Like governor Glenn Stevens and others in the RBA’s top team, Edwards took aim at the expectations business has when it comes to expected returns on their investments – so-called hurdle rates.

While businesses are not overly responsive to the fall in interest rates, the overall level of low rates will ultimately encourage business to start spending, he argued, because while rates stay low they will continue to stimulate domestic demand.

All up Edwards said that, “interest rates have been very effective over the past 12 months,” adding they’ve “helped with the Aussie dollar, helped with the growth rate, and we’ve seen the beginnings of a very big increase in housing construction which is what we need.”

All up that sounds like good news.

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