Taming the dollar is dangerous: Swan

Written By Unknown on Rabu, 01 Mei 2013 | 11.51

TREASURER Wayne Swan believes it would be a "folly" and extremely dangerous for Australia to intervene to curb the strength of the Australian dollar, despite its impact on company profits and government revenues.

The domestic dollar has trading above parity against the US dollar for some time.

Its continuing strength is a major factor in forcing the federal government to scale back its revenue expectations by $12 billion for this financial year.

Mr Swan said the currency's strength was a reflection of the strength of the local economy as well as relative weakness in other countries such as the US.

"We have a developed economy in very good nick," he told a business function in Melbourne on Tuesday.

A favourable change the US growth outlook might ease some of the upward pressure on the Australian dollar, but Mr Swan ruled out any Reserve Bank of Australia or government market intervention.

"A Swiss style intervention would be folly ... extremely ineffective and dangerous," he said.

The Swiss central bank has previously intervened to try and tame the strength of the Swiss franc, spending billions buying up euros on foreign exchange markets.

Mr Swan said the fact that the Australian dollar had been high despite a downturn in global commodity prices suggested its strength would remain "for some time to come".

Global investors looking for growth opportunities now turn to the Asia-Pacific and the Australian dollar, whereas previously Australia was an investment option.

"That's the big change that has come as a consequence of the resilience that our economy demonstrated during the global financial crisis," he said.


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