The RBA has been talking the Aussie dollar down for the best part of 18 months now.
At 76 cents this morning, it’s around 20 cents below where it was when RBA governor Glenn Stevens first tried to jawbone it lower.
The RBA wants the Aussie lower because it will help local business and change consumer and business preferences toward local production and consumption.
Or as RBA assistant governor Christopher Kent put it this morning:
Economies are responsive in many other ways that don’t require the active input of policymakers. The so-called ‘invisible hand’ of markets can provide the incentives for producers and consumers to alter their behaviours via a range of price signals.
The Aussie dollar provides such a signal, Kent said, adding that the 20 per cent depreciation (TWI basis) since the high in 2013 is “starting to play a role in helping the economy adjust”.
Australians and foreigners will direct more of their spending to Australian produced goods and services (such as tourism and education) as they become relatively cheaper compared with the alternatives available offshore. Along the same lines, the depreciation has lowered the level of Australian wages when measured in foreign currency terms; since April 2013, they are 30 per cent lower in US dollar terms.
But in a clear signal that the RBA wants the Aussie dollar even lower, Kent also said that while the fall so far was “helpful”, the RBA’s assessment is that “our exchange rate remains relatively high given the state of our overall economy”.
That’s a clear signal on the morning the Aussie dollar hit its lowest level since May 2009 that it still has a long way to fall.
You can read the full speech here.