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Falling dollar boosts economy

by Jessica Darnbrough2 minute read
The Adviser

The falling Australian dollar is helping to rebalance growth, the Reserve Bank of Australia (RBA) has claimed.

According to the minutes of the RBA's July board meeting, the falling Australian dollar is having a cushioning effect on the export sector, offsetting recent weaknesses in commodity prices.

In addition, the minutes noted that the falling dollar will provide a boost to inflation, rebalancing growth in the Australian economy.

Despite this, the RBA maintained its easing bias, arguing that the inflation outlook could “still provide some further scope for easing, should that be required to support demand”.

HSBC chief economist Paul Bloxham said the minutes also show the Reserve Bank was confident that recent cuts in the policy rate were beginning to have an impact on the domestic economy.

“The RBA minutes expanded on impact of the lower Australian dollar, noting the cushioning impact for the export sector and the inflationary impact,” he said.

“The minutes noted early signs emerging that lower rates are boosting the housing sector, but that the non-mining business sector remains subdued.

“Slower than expected rebalancing may see the need for further policy stimulus from the RBA, but further weakness in the Australian dollar could obviate the need for further cuts.”

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