Thursday, February 2, 2012
If it is stays in that zone, as policymakers expect, that will make a huge difference to where our jobs are, what they are and what they pay.
It's already happening. The Bureau of Statistics says 127,500 manufacturing jobs have been lost since 2008.
That's devastation of factory work on the same scale as in 1990-91. The banks are tipped to move thousands of office jobs to India this year. Other businesses will follow. It is only a matter of time before government itself does the same.
Don't blame business. It either makes profits or goes to the wall. The 50 per cent rise in our dollar makes it 50 per cent more expensive to make things or do jobs in Australia than in the rest of the world.
You can't blame Ford or Westpac or Woolies if they shift jobs to places where they can be done more cheaply.
Yesterday Julia Gillard wanted to assure us this was a Good Thing.
She likened it to the "structural change" in the Australian economy after the Hawke government slashed tariffs in the depths of recession in 1991, with the job losses being just "growing pains". It was about "building a new Australian economy" that would be "more adaptable, more flexible and able to seize new opportunities than ever before".
Well, the businesses that survive a 50 per cent rise in relative costs will certainly have to be adaptable and flexible; that's why they will shift jobs offshore wherever possible. That will cut jobs in areas where we work in offices and factories, offset by job growth in areas with mines and pipelines.
That's why full-time jobs fell by 31,000 last year in the south-eastern states but rose by 40,000 in the north and west. On current forecasts, that will accelerate this year, as more companies adapt to the new reality.
The Australian dollar has not soared simply because the world sees Australia as a "safe haven". Since the start of 2000, the Aussie has risen 44 per cent against all other currencies, yet China's yuan rose just 16 per cent and South Korea's won actually went backwards.
Both China and South Korea have grown much faster than Australia in the past decade but they manage their currencies to keep them down so their manufacturers stay competitive.
Australia won't do that. The Reserve Bank has never intervened to stop the dollar rising, only to stop it falling. Both the Reserve and Treasury see this mining boom lasting for years and probably decades. On that assumption, they believe the dollar is in the right zone and if companies can't cope, that's their problem. Gillard agrees.