Australian dollar to remain high for years on perception as safe haven: PM

The currency has soared past parity with the greenback on the back of Australia's commodities boom and relatively high interest rates over the past two years, reaching its highest levels since it was first floated in 1983.

Gillard said as European economies suffered — with even traditional currency strongholds such as Switzerland affected — “for the first time in history Australia is being referred to as something of a global 'safe haven.'”

“It's a striking development in our economic history that in a period of global uncertainty, the Australian currency is holding its value,” the prime minister told an Australia-Israel Chamber of Commerce lunch in Melbourne.

“What is certain from all of this is our dollar is likely to remain relatively high for years to come.”

The commodities-linked Aussie had a stellar run against the greenback in 2011, breaking through 110 U.S. cents in July. It was trading Wednesday at about 106.16 U.S. cents.

Gillard said there was growing evidence that the strong dollar — which first breached parity with the greenback in Oct. 2010 — was best explained by confidence in the economy.

“It's well known that Asia's demand for our mining output — together with the domestic investment to expand our mineral capacity — has lifted demand for our currency, with its value up almost 60 percent against the U.S. dollar since 2009,” she said.

“There's another driver: investors looking to the Australian dollar as a substitute for betting directly on growth in our region — especially in China.”

The flipside was that the high currency had hurt some sectors badly, including tourism, education exports and manufacturing, she said.

“The level of the dollar — and the pace of its rise — has broken some business models and forced economic restructuring.”

But she said the strong dollar was driving change and in doing so making the economy leaner and stronger.

Australia survived the global financial crisis without dipping into recession but delivered a stimulus package that cut into the budget.

Gillard said she would bring the budget back to surplus in 2012/13 despite the difficulties of the global turmoil.

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