Devaluation is here, but will it help?

A lower Australian dollar is supposed to boost our competitiveness, but weak wages growth and inflation around the world threaten to rob us of the benefits of a falling currency.

Friday’s October payrolls report seemed to entrench the rut that the American economy is in: unemployment is falling but wages aren’t rising. It means the US dollar will keep going up but inflation is not going with it.

It’s difficult to overstate the importance to Australia of what’s going on. In essence, low wages growth and inflation elsewhere in the world could rob Australians of the benefits of a falling currency.


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