MNI POLICY: RBA Lowe: Prefer AUD Lower, But Resigned To Level

By Lachlan Colquhoun

     SYDNEY (MNI) - The appreciating Australian dollar could become a problem

for the domestic economy, but that point hasn't yet been reached, Reserve Bank

of Australia Governor Philip Lowe said Monday.

     Accepting that he "would like a lower aussie dollar", Lowe said he is not

surprised at its current level and relative appreciation given Australia's

economic performance and the comparable monetary policies of other central

banks.

     Lowe said he would "like a lower currency in terms of macro outcomes",

which would help reduce domestic unemployment and lift inflation closer to the

RBA target.

     "We need to understand that exchange rates are relative prices," he told a

panel at the Australian National University's Crawford School of Public Policy, 

     "So if everyone eases and we don't we would expect the AUD to appreciate.

At some point that could become a problem but I don't think we have reached that

point yet."

     The AUD traded at USD58 cents in late March and is at USD68 cents today,

after reaching USD70 in recent weeks.

     Lowe said he believed it was "really hard to argue that the AUD is over

valued" and its current level was not surprising.

     --EMPLOYMENT TARGET

     Speaking as to whether the RBA target the unemployment level when setting

policy, Lowe said he didn't believe it made sense to have such a target in the

same way as the RBA has targets for inflation.

     "We are seeing now how unemployment is a misleading indicator," he said.

     Other factors, such as underemployment and participation rates, were also

important in understanding the labour market and had an influence on the

unemployment rate.

     "We need more information than just the unemployment rate," said Lowe.

     He said that Australia's downturn had not been as severe as expected, and

hours worked -- another key metric on the labour market -- had not fallen as

much as expected.

     In the early weeks of the Covid-19 outbreak, the RBA had expected a 20%

fall in hours worked, but now was expecting this metric to fall by only 10%.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMLRB$,M$A$$$,M$L$$$]