So please stop with all the sky is falling and scary debt stories some of you... Yahoo News... .. The high value of the Australian dollar has boosted the spending power of households in the past decade, the Reserve Bank of Australia (RBA) says.
RBA Deputy Governor Phillip Lowe on Thursday said households were reaping the benefit of the currency's high value.
He said that while household incomes had grown by about 60 per cent in the past decade, the Australian dollar's rise meant that the price paid for many manufactured goods had remained, on average, virtually unchanged.
"The stable prices for many goods, combined with strong disposable income growth, means there is more disposable income to be spent on services," he said in an address to the Committee for Economic Development of Australia (CEDA) in Sydney.
He said that a once-in-a-century investment boom, fuelled by demand for Australian resources, was the main reason for the currency's strength.
However, he said, the boost to disposable incomes had come at the expense of a number of industries.
"The effects of the high exchange rate are evident in the manufacturing, tourism and education sectors, as well as some parts of the agriculture sector and, more recently, in some business services sectors.
"In some cases, this is prompting renewed investment to improve firms' international competitiveness.
"But in other cases, businesses are scaling back their operations in Australia and some are closing down."
Dr Lowe said that both the investment boom and the Australian dollar's high value were historically unusual events and it was difficult to assess their net effect on the economy.
However, he said, the two forces appeared to have balanced each other out relatively evenly in the past few years.
He said that the outlook for the Australian economy remained strong with gross domestic product (GDP) and inflation expected to grow around trend over the coming years.
As a result, he said, the country was well-placed to deal with any flow-on effects from Europe's sovereign debt crisis.
"We have much more flexibility to deal with unfolding events than almost any other developed economy."
