IMF recommendation to elevate Aussie dollar to global reserve status could spell more local industry pain
The Aussie dollar is likely to rise further if the International Monetary Fund pursues its recommendation to make the Australian dollar a new global reserve currency.
The IMF has recommended the Australian and Canadian dollars be included in its official currency reserve breakdowns which include the US dollar, European euro, United Kingdom pound, Japanese yen and Swiss franc.
The Aussie dollar is currently only included in the IMF's "other" currency category which makes it difficult to determine the extent of demand for the Australian dollar.
Treasurer Wayne Swan welcomed the IMF recommendation and said it was yet more confirmation that Australia is seen as a safe haven for global capital and one of the most attractive investment destinations in the world.
"While not everyone is on easy street, this decision is further recognition that, unlike so many advanced economies, we have a resilient economy, with solid growth, low unemployment, low interest rates and a big pipeline of investment," Swan said.
"While we know the high dollar makes life hard for some sectors of our economy, it also reflects our strong fundamentals during the ongoing and acute volatility experienced in the global economy."
However, business groups say further increases in the Australian dollar will hurt businesses.
Innes Willox, chief executive of the Australian Industry Group, told SmartCompany while attaining reserve currency status "might confer bragging rights", its main impact in the real world would be to further add to the pressures that are overvaluing the domestic currency.
"We are already suffering from a currency that is higher than can be justified by the fundamentals of our terms of trade and our domestic productivity," Willox says.
"The high dollar is creating intense pressures on a range of industries competing with imported goods and services or trying to sell into export markets. We should avoid adding to these pressures."