RBA blamed by steel execs for overvalued dollar

Executives at the Australian Steel Institute’s annual conference have blamed the Reserve Bank for the high Australian dollar, The Australian reports.

Both Paul O’Malley and Geoff Plummer, the CEOs of BlueScope and Arrium respectively, have argued that the dollar – a big pain for the manufacturers – is unnecessarily high and policy changes are necessary to ease pressures on the industry.

“We're encouraging the speculative flows because we have, by any international standards, very high real interest rates, so people can get a real interest rate return,” said Plummer to The Australian.

“If there's no risk of inflation, and the Reserve Bank's focused on inflation, then why are they unarguably damaging some parts of the economy?”

The current interest rate of 3.5 per cent is well below the average since 1990 of 5.58 per cent. 

O’Malley commented that policy action should be taken to decrease the high cost of doing business, for example labour market reform and decreasing energy costs. He also suggested the dollar was “higher than the terms of trade would imply.”

Recommendations to reduce the high dollar, such as the Prime Minister’s manufacturing taskforce’s suggestion of a sovereign wealth fund, have previously been dismissed by the government.