The high dollar trap

The Australian economy will suffer if the Aussie dollar stays high against the $US.

In my view the big call for investors in 2013 is the ultimate direction of the $A against the $US. It is my strong view that a rising $A from current levels could well seriously depress the Australian economy. Talk of the $A rocketing up through US$1.20 is to my mind both fanciful and delusional. Such a move, if it is not supported by a significant improvement in both our trade account and our labour productivity, would pre-empt a disaster for our economic base. A rally to $1.20 would therefore be very short lived.

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