Australia must face up to the challenges of a strong local currency, Prime Minister Julia Gillard said as she hosts a two-day meeting with executives aimed at boosting business support for her government.
“The high dollar is a huge game-changer,” Gillard wrote in the Australian newspaper today. “The critical pillar of our response” to structural changes in the economy “is being prepared to get in and shape the change, not hide from it.”
Gillard and Treasurer Wayne Swan will host 130 business, union and community leaders in Brisbane from today to discuss the impact on the economy of a shift in global wealth to Asia. The local dollar has appreciated 73 percent in the past decade against the U.S. currency, driven by Chinese and Indian demand for the nation’s raw materials.
While the resources boom has made Australia one of the fastest-growing economies in the developed world, Gillard’s government isn’t getting a lift in opinion polls as tourism, manufacturing and retail industries struggle with the sustained strength of the local currency. A Newspoll survey today showed support for the ruling Labor Party slid even after the central bank lowered interest rates at its past two meetings, the government announced cash handouts, the economy expanded twice as fast as forecast, and employment growth accelerated.
Labor’s primary vote dropped 1 percentage point to 31 percent and the Liberal-National opposition fell 2 points to 44 percent, the survey published in the Australian showed. The poll of 1,146 people was taken June 7-10 and had a margin of error of 3 percentage points. The Greens gained 2 percentage points to 14 percent.
The Reserve Bank of Australia lowered borrowing costs by 75 basis points in the past two meetings, to 3.5 percent, benefiting households in a nation where almost 90 percent of mortgages have variable rates.
RBA Governor Glenn Stevens last week expressed optimism about the nation’s outlook in a speech titled “The Glass Half Full.” Stevens said he felt the need to do some “cheerleading” for the economy in response to negative commentary on the country’s prospects. The governor is due to address the conference in Brisbane tomorrow.
“While shaping change is at the heart of our efforts, confidence is the soul of our sense of economic wellbeing,” Gillard wrote today. “You don’t get hard things done without believing in yourself.”
Australian employers unexpectedly added workers in May, as the number of people employed rose by 38,900, capping the best January-to-May period of hiring in five years, a government report showed June 7. A day earlier, data showed that compared with a year earlier, the economy expanded 4.3 percent in the first quarter, the fastest annual pace since of 2007.
The nation’s economy is being powered by an estimated A$500 billion ($493 billion) pipeline of resource projects that is spurring hiring by companies including BHP Billiton Ltd.