The floating dollar also integrated Australian markets with the world and increased confidence in the economy. The currency float helped create the groundwork for a series of deregulations initiated by the Hawke and Keating governments, including the licensing of foreign banks, the loosening of restrictions around loans, the lowering of tariffs and the move away from centralised wage regulation.
These policy shifts were facilitated by the long period of economic stability and formed the backbone of the more competitive, more international Australian economy that developed in the last two decades of the 20th century.
Journalist and author George Megalogenis discusses the significance of floating the Australian dollar. The National Museum of Australia acknowledges First Australians and recognises their continuous connection to country, community and culture. Defining Moments Australian dollar floated. Dick Bryan, economist, Sydney University:. Treasurer Paul Keating, July Opposition to the float Over the next few months, the newly appointed Governor of the Reserve Bank, Bob Johnston, openly encouraged Hawke and Keating to move to a floating exchange rate.
Dollar floats In the early hours of Friday 9 December Keating called Johnston and asked him to fly to Canberra for discussions. George Megalogenis Curriculum subjects. Year levels. Explore Defining Moments.
Holey dollar. First bank in Australia. First stock exchange. Decimal currency. Even by the mids the huge amounts of cash sloshing around international markets had made it hard to pick the right value. Read more: Explainer: how the Australian dollar affects the results of companies.
Each time the Australian dollar falls, it makes the products we produce cheaper for overseas buyers, and it makes them cheaper for us compared to overseas products. As it happened, other Australian exporters and businesses gained a new lease of life, smoothing the adjustment and creating other homes in other parts of the economy for the labour and other resources that had been devoted to mining.
Read more: Sense, think, act: the principle that governs everything from rocket landings to interest rates. As foreign buyers tried to get hold of the Australian dollars they needed to pay for our minerals, the dollar climbed, making life harder for other exporters and firms that competed with imports who ceded labour and other resources to mining. It was an automatic stablisation that could never have been achieved by bureaucratic price-setting. Even if the bureaucrats had known what prices to set, the political pressures they would have faced from manufacturers lobbying for a low dollar, and retailers and consumers lobbying for a high one, would have made the process agonising.
Political food fights make for bad economic policy. It was a bit the same with the Reserve Bank. The rest is up to the Reserve Bank. It has been able to embed low inflationary expectations in a way the government might not have been able to, making disastrous wage-price spirals a thing of the past.
And while there is an important debate about what the right monetary policy framework should be in a post world, there is little debate that Reserve Bank independence is crucial for implementing it.
It is increasingly used as a proxy for Asia and for commodity currencies. The Australia-US dollar pair is the fourth most traded pair in the world. Much of the funding that Australian banks need comes not from deposits but from overseas capital markets. It allows them to lend as needed, unconstrained by the extent of their deposits.
But there are other big reforms in prospect. On issues from climate change to tax reform to immigration, it is important to get the underlying settings right. This article is republished from The Conversation under a Creative Commons license. Read the original article. Skip to main content.
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