Comments from the Reserve Bank of Australia (RBA)’s Edwards in the Australian Financial Review:

  • Would have preferred to see a weaker AUD
  • Export surge is holding up the AUD

The Australian Financial Review is gated: ‘Bountiful’ mining revenue holds up $A

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ADDED:

  • “I personally would have certainly preferred to see it weaken, and it hasn’t, and that does suggest global markets have more rapidly adjusted to the Fed’s plans to normalise than expected”
  • Said Australia was in the grip of a “bountiful” mining and energy export-driven revenue surge
  • Said attempts to “jawbone” the currency down weren’t guaranteed to succeed: “It’s very difficult to expect rhetoric to have an impact on economic forces which are running in the opposite direction … If you’ve got a mood going on in the currency, then rhetoric alone is not going change it.”

This is interesting from the article:

  • Edwards highlighted the trade balance, which has improved sharply over the past seven months, helped by surging iron ore shipments.
  • The widening trade flows go to the heart of an emerging debate among economists that Australia may be on the cusp of ending more than two centuries of current account deficits, after Commonwealth Bank of Australia economist Michael Blythe in February published research arguing regular surpluses were likely within five years.
  • Dr Edwards said one consequence of what Mr Blythe was saying would be a higher dollar, despite lower commodity prices, which have traditionally been the driver of the currency’s value. “The currency argument is that a fall in the terms of trade should see lower exports and therefore less demand for the Australian dollar,” Dr Edwards said. “It’s not working out like that. In fact US dollar revenues have increased [for local mining companies].” “And the balance of trade has for several months been positive, once again. And that means, in terms of what happens in foreign exchange markets, you wouldn’t necessarily expect to see a weaker dollar if it’s associated with, effectively, a boom in exports.”