Dollar likely to be “materially lower”, RBA governor Glenn Stevens says

Reserve Bank governor Glenn Stevens has today made clear the dollar is more likely to fall than rise, given the current economic conditions.

Speaking at an investment conference this morning Stevens said the current high Australian dollar is not supported by “levels of cost and productivity”.

“Moreover, the terms of trade are likely to fall, not rise, from here. So it seems quite likely that at some point in the future the Australian dollar will be materially lower than it is today,” he says.

He says US stimulus tapering “would lessen some of the difficulties we face in our own policy choices”.

Stevens also downplayed the fears of a house price bubble.

“Some rising in house prices is part of the normal cyclical dynamic, that it improves the incentive to build, and that a price rise reversing an earlier decline probably isn’t something to complain about too quickly,” he says.

“It has been a little too early to signal great concern.”