Aussies take flight as our dollar continues to soar
AUSTRALIANS are leaving the country as never before. The soaring Aussie dollar and low international air fares pushed the number of Australians taking holidays overseas above 600,000 in September with the number leaving in the past year hitting a record 6 million.
In its quarterly assessment of the economy released yesterday and prepared ahead of the latest tourism numbers, the Reserve Bank said overseas departures had jumped 17 per cent since January. The trend in departures is now further ahead of arrivals than it has ever been, with little sign of the Aussie dollar flagging.
The Reserve Bank report says the Australian dollar has climbed further than any other currency against the US dollar in recent months, rising 31 per cent since March.
Only the South African rand, the Brazilian real and the New Zealand dollar come close.
A US economist, David Hale, in Australia as a guest of the Commonwealth Bank, told a seminar in Canberra to expect parity with the US dollar by January.
The Aussie closed Friday at 91.36 US cents after climbing from 68.7 US in March. Mr Hale said the Aussie would keep climbing beyond 100 US cents until serious doubts emerged about the health of the Chinese economy.
''Traders use the Aussie as a proxy for China,'' he told the business audience. ''It's no longer about the Australian economy.''
Asked whether Australian manufacturers as well as local tourism operators stood to be hurt by the soaring dollar, Mr Hale said he was amazed at how weak the export lobby was in Australia.
''They are not being heard,'' he said. ''Your Reserve Bank doesn't seem to regard your exchange rate as a constraint.''
The Reserve Bank report says Australia's exports are well on the road to recovery, with exports of coal and iron ore to Japan back to near where they were before the start of the global recession.
Exports to China, meanwhile, have climbed much higher.
The report warns that exports of some key commodities are approaching capacity but says investment already under way should ease those constraints, allowing production of bulk commodities to increase by about one-third over the next two years.
The bank expects the Australian economy to return to healthy growth more quickly than Treasury does, predicting 3 per cent growth in year-average terms during 2010-11 - somewhat more than the 2.75 per cent predicted by the Treasury in Monday's mid-year budget update.
Importantly, it believes that even with that healthy pace of growth, inflation will remain controlled and has factored into its forecasts only ''gradual'' interest rate hikes.
Fresh from talks with Reserve Bank officials, Mr Hale said it wanted to move its cash rate from 3.5 per cent to 4 per cent quickly and would do so by February.
Suggesting the RBA might pause before lifting again, the report says the bank expects the phased withdrawal of the Government's stimulus measures will act as a drag on growth in the months ahead.
Further down the track, it believes the economy will be able to grow faster than before, with fast population growth and strong investment lifting the effective ''speed limit''.