Unmentionable economic forces - Ross Gittins

I'm no economist (although I did once attend a Ross Gittins lecture at high school) but it seems that economist Ross Gittins is not giving us the full picture on what is causing the Australian Dollar to remain high.

Gittins wants our dollar to come down so that our exports, manufacturing and tourism industries can become competitive again. He says the dollar should have come down since the recent downturn in the mining industry, but it hasn't because of the USA printing money and debasing its currency relative to ours.

That is true, but alas, he doesn't mention the other factors increasing our dollar: foreign purchase of farms and homes, and foreign students paying for university degrees. If we knocked out these two sources of demand for Australian Dollars, how much would our dollar fall? Who knows, because these foreign economic forces are apparently unmentionable.

Ross Gittins, QE inaction throws spanner in our works
... one of the ways quantitative easing stimulates demand is by putting downward pressure on the country's exchange rate.

And anything that puts downward pressure on an important currency like the US dollar puts upward pressure on our dollar. What's stimulatory for them is thus contractionary for us...

With export prices having fallen a fair bit over the past two years, we expected to see our dollar come down and stimulate production in manufacturing and tourism.

For a long time nothing happened. It started falling in mid-April, but still hasn't fallen as far as it probably should given the size of the fall in export prices.

It took us too long to realise what the problem was: quantitative easing in other countries, particularly the US. Our dollar couldn't come down because it was being held up by the weak greenback.
So why would Gittins give us a blinkered economic view? You can guess the answer.

But wait, there's more. As proof of the huge Chinese buy-up of Australian properties I was going to quote this article:
Home prices in Sydney are being pushed up in part by unprecedented levels of Chinese demand, according to McGrath Estate Agents.

As much as 80 per cent of homes in parts of Sydney are being sold to Chinese buyers, said chief executive John McGrath.
But alas, that article has now been censored to remove all reference to the Chinese.

File under: unmentionable spanners.


  1. It's about to get worse. The new Significant Investor Visa scheme will just make the dollar higher. The Chinese can now buy residency for a $5million investment. These are effectively competing exports that crowd out traditional exports. We're now exporting visas.

  2. Yes, good point. And the Chinese are no doubt buying up businesses and building their own business precints. All these push the dollar higher but not a word will be spoken by Gittins or Tony Abbott or anyone. Fatalism is a disease.