Since the float in 1983 it seems the Aussie dollar has become one of the media, and the public’s, most watched asset prices.
Whether it’s the evening news on the telly or numerous other bulletins throughout the day, the level of the Aussie dollar, along with the rise and fall of stocks, is reported as if it is a footy match.
Unlike stocks, which we all want to rise steadily and sustainably, the ebb and flow of the Aussie is far more nuanced in its effects on the economy. Sure, when the Aussie dollar is rising overseas, travel is cheaper for Australians and we can buy stuff from Amazon on the internet cheaper.
But while it’s a weak, not strong dollar, Australians should be cheering, everyone loves an underdog.
Just look at the global support that Leicester City gained as they fought toward victory in the English Premier League. Look at the support North Melbourne have picked up as they sit atop the AFL ladder in season 2016.
The Australian dollar seems to attract that same sort of support.
For years when I was working in wholesale financial markets as a fund manager and strategist, the AUDUSD was often casually called the “Aussie Battler” because it never seemed to be able to hang onto its gains. Whenever it seem to rally, there was always something around the corner which knocked it off its perch and pushed it lower.
It was as though traders, both here and abroad, had an affection for the Aussie stemming from a perceived underdog status.
But what’s natural in competitive sports can be counter-productive when it comes to the way Australians think about the Aussie dollar.
A lower Aussie dollar, RBA modelling and the recent experience has shown, provides a lift to the Australian economy. In its recent quarterly Statement on Monetary Policy, the RBA highlighted the upside the Aussie dollar’s fall has given to Australia’s massive services sector.
It’s no surprise that we lost the car industry, and services struggled when the Aussie dollar was at parity with US and consequently stronger against most global currencies.
Tourism, education, and business services have all picked up as the Australian dollar has weakened. That, along with construction and a lift in household consumption, is what’s driving Australia’s economic transition.
So I want to propose a change – it’s a radical one. Let’s stop thinking about the Australian dollar as AUDUSD and start thinking about it in USDAUD.
In the end it’s the same value for government, business, and consumers, but because it’s inverted to the way we think about it, now we can start cheering when USDAUD rises.
Then it really will be good for the economy.