Is RBA talking down the Australian Dollar?

"Against a basket of relevant currencies the Australian dollar has fallen by less, but the decline is still about 11 per cent since August. Further adjustment is probably going to occur."

Governor Glen  Stevens on 13 February 2015

Our Comments:

With business investments peaking in 2011 - 2012 and since then falling,  Australia is unlikely to be in any comfort zone any soon.

Business Investments  y-o-y percent changes

2011		Q3	20.09
		Q4	15.72
2012		Q1	16.49
		Q2	18.54
		Q3	9.59
		Q4	12.14
2013		Q1	1.65
		Q2	-0.33
2014		Q1	-3.14
		Q2	-5.47

2011 to 2014

Source: OECD

Business Investments  y-o-y percent changes

The resource based Australian economy  has seen a reversal of its high investment period mirroring a slowdown in the Chinese economy. With the falls in prices for export commodities has affected, apart  from the  terms of trade turning adverse, the incomes both present and potential  have come down thus restraining the  purchasing power.  The adverse income growth have lowered revenue flows to mining companies and revenues for both state and federal governments.  There is a consequential fall in incomes of households.  The fall in oil prices, does increase the real incomes of consumers, but fears of a recession and rising unemployment  holds spending back.

Dwelling construction which had been rising strongly  may have to slow  down as Chinese investments slow.  

Increased asset values, which push up gross measures of wealth, and low interest rates are also working to push consumption up relative to income.

By the Reserve Bank of Australia's view, non-mining business investment spending and public sector spending are also subdued.

All this has resulted in a fall in the Australian dollar. This should help restructure the Australian economy towards a greater contribution by Education and Tourism sectors. The lower exchange rate should help export volumes    in these sectors. Overall, growth in non-mining economic activity has picked up, but is still a little below average.

Against the US dollar has fallen by around 17 per cent .   

Australian dollar may like to fall further to boost Education and Tourism