No need for Aussies to panic and learn to live with prosperity

Comments on Alan Kohler “Australian dollar disaster”, 27/10/2009, http://www.businessspectator.com.au/bs.nsf/Article/Australian-dollar-disaster-pd20091027-X7R9U?OpenDocument&src=sph

Alan, there is no need to be so alarming about the rise of the Aussie dollar.

While the so called Dutch disease may present a problem, it can also present some opportunities to Australia.

One is that it will force manufacturing and construction to upgrade their structure to a higher level, through enhanced productivity and better entrepreneurship and management.

A second opportunity is that it may afford the RBA to be a little more relaxed on inflation and hence on its interest rate. A more relaxed inflation target will make the interest rate differential between Australia’s and the international ones smaller and reduce capital inflow for portfolio capitals. It also benefits Australians with low mortgage rates.

The third one is that Australian’s can use the higher purchasing power of the Australian dollar to either enhance their lifestyle, or invest overseas to reap more reward.

So, I am not as pessimistic as some of the commentators or some policy advisors are. One should learn to live with prosperity.

At the same time, I am appalled by the panic some people have shown regarding the rise of the Aussie dollar.