Reserve Bank governor Glenn Stevens has today made clear the dollar is more likely to fall than rise, given the current economic conditions.
Speaking at an investment conference this morning Stevens said the current high Australian dollar is not supported by “levels of cost and productivity”.
“Moreover, the terms of trade are likely to fall, not rise, from here. So it seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today,” he says.
He says US stimulus tapering “would lessen some of the difficulties we face in our own policy choices”.
Stevens also downplayed the fears of a house price bubble.
“Some rising in house prices is part of the normal cyclical dynamic, that it improves the incentive to build, and that a price rise reversing an earlier decline probably isn’t something to complain about too quickly,” he says.
“It has been a little too early to signal great concern.”
Construction sector plateau likely
Construction activity is not expected to recover to mining-boom levels and is due for anaemic growth – or real-terms decline – over the next two financial years, according to the Australian Industry Group’s latest construction outlook survey.
Engineering and commercial construction will come crashing down from its mining-fuelled 10.6% growth spurt in 2012/13 to grow 2% this year and 1% next year.
“This reflects weaker conditions across a range of infrastructure categories and resource-based heavy industrial sectors. However, telecommunications work is forecast to remain robust in line with the NBN roll-out and related investment. Levels of construction activity are also expected to hold up reasonably well in the oil and gas sector (despite a slower growth outlook) while civil projects (such as terminals and ports) are expected to still generate solid work in 2013/14 before weakening the following year,” the survey reported.
In 2014/15 commercial construction is due to recover to above-CPI growth of 4.4%.
Tourism body calls for scrapping of departure taxes
Revenue raising taxes should be scrapped from departures which “collects nearly four times more revenue than it costs to provide the passenger processing services it was introduced to pay for”, says the Tourism and Transport Forum in a new report released today.
The forum made the claim after federal government body Tourism Research Australia released its 2013 State of the Industry report.
Overall, the total visitor expenditure increased by 3.9% to $97.7 billion. The number of international visitors reached a record 6.3 million in 2012/13.
“State of the Industry 2013 shows that the industry’s performance improved in 2012–13 on most indicators. This was achieved despite the continuing high value of the Australian dollar and a range of challenges in the global macroeconomic environment,” the report stated.
Shares open lower
Aussie shares have fallen on open this morning, despite the market closing a five-year high yesterday, buoyed by the major banks.
The S&P/ASX 200 benchmark was down 19.4 points to 5422 at 11:44am AEDT.
Overnight the Dow Jones remained steady, closing down 1.35 points to 0.01%.