Reserve Bank governor Glenn Stevens noted that although the high dollar had hitherto held back the non-mining recovery, the necessary adjustment to its value "seems to be occurring, with relatively little disruption, and is having an expansionary effect". Photo: Glenn Hunt

The Reserve Bank of Australia finally appears happy with the level of the Australian dollar, as governor Glenn Stevens's main concern has now switched to long-term growth trends and the need for fiscal reform.

Australia's secular slowdown, and the reasons for it, took centre stage at the governor's annual address to the Anika foundation in Sydney this week.

The relative strength of the Australian dollar, for about a year worthy of special attention in central bank commentary, was barely mentioned in passing.

Mr Stevens noted that although the high dollar had hitherto held back the non-mining recovery, the necessary adjustment to its value "seems to be occurring, with relatively little disruption, and is having an expansionary effect".

Advertisement

This official view of the currency has changed substantially in just over a fortnight.

As recently as the minutes of the RBA's July 7 board meeting, released on Tuesday, Mr Stevens had continued his "jawboning" of the Aussie, noting that its depreciation on a trade-weighted basis had "offered less assistance than would normally be expected in achieving balanced growth in the economy". He said further depreciation "seemed both likely and necessary".

Commentators noted the change in language in Wednesday's speech.

"Stevens was non-committal on where he preferred the Aussie, but noted that the adjustment of the currency, which has depreciated 5.1 per cent on a trade-weighted basis over the past two months, is having an expansionary effect on the economy," wrote Australia and New Zealand Banking group's co-head of Australian economics Cherelle Murphy.

TD Securities's foreign exchange and rate strategist Prashant Newnaha also noted the more positive language, pointing out that attempts to talk down the currency had, until this week, been a feature of recent RBA statements and commentary.

"There was no mention of the Aussie declines needing to be both 'likely and necessary'," he wrote.

"We question whether the RBA is now more comfortable with where the Australian dollar is at, as absence of jawboning suggests the bank has no sense of urgency to drive the [currency], with the current adjustment seen as having a positive impact."

Perhaps ironically, the Aussie rose slightly in response to Mr Stevens' speech, as traders and investors detected a softening in the RBA's easing bias.

However, it later eased back again and was fetching on US73.56¢ in morning trade on Friday.