Why is the Australian dollar so high?

Posted on: March 10, 2013
Posted by: Bob Budreika

We often hear from our media that our dollar is so high because our mining exports. While there is some truth to this, there are actually a number of other significant influencing factors that are not so well known.

Like many other countries, Australia relies on foreign funds to fuel our economy – primarily because we don’t have enough internal savings to finance growth.  Currently most major countries have a very low interest rate environment so it is much more attractive for investors to place funds in Australia.

If our interest rates were to fall so they more closely aligned those of the US or Europe, there would be a mass exodus of these foreign investments which would result in our currency falling in value and forcing interest rates to rise.  Our Reserve Bank carefully manages rates so there is a balance between attracting foreign capital and the cost of money to support the growth of our economy.

Bob Budreika
Planning for Prosperity

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