RBA Minutes: Need AUD/USD to Drop Further

Australia’s central bank reiterated the need for deeper currency declines to balance economic growth that’s predicted to remain below average until the latter part of 2016.  “A lower exchange rate would have an immediate beneficial effect on some sectors such as tourism,” the Reserve Bank said in minutes of its June policy meeting in Sydney Tuesday. “It would need to be lower for a sustained period to have a significant effect on large investment decisions in other trade-exposed sectors.”

Governor Glenn Stevens reinstated an explicit easing bias last week to support growth even after two interest-rate cuts this year brought the benchmark to a record-low 2 percent. While employment improved in May, policy makers have been frustrated by the currency’s failure to reflect declines in commodity prices as China’s economy slowed.

“The board’s assessment was that the stance of monetary policy should be accommodative,” the central bank said. “Output growth had continued at a below-trend pace over the past year and would remain a little below trend in the period ahead before picking up to around trend in the latter part of 2016.”