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AUDUSD is hovering around $0.7400 after RBA Governor Steven’s speech

Australia's central bank governor admitted on Wednesday that the lower Australian dollar was starting to have a positive impact on growth, but that the transition was slower than they had anticipated.

Stevens went so far as to say that the weaker Australian dollar was having an "expansionary effect" on the economy, when he addressed an audience at the Anika Foundation Luncheon, in Sydney on Wednesday.

Stevens explained that there has not been quite enough domestic demand to achieve full employment, in the face of the fall in business investment. "That is why we have felt that, on balance, a somewhat lower exchange rate was likely to be a part of the necessary adjustment. That adjustment seems to be occurring, with relatively little disruption, and is having an expansionary effect." he said.

Stevens conceded that while the economy is making the adjustments required, "it is a bit slower than we would ideally have liked."

This is partly due to households being more prudent with their incomes, reducing the impact of recent monetary-policy adjustments, which has seen the RBA lower interest rates to record-low levels.

Inflation figures released earlier on Wednesday showed Australia's CPI rising 0.7% in the June quarter, or 1.5% year-on-year, gaining from the March-quarter increases of 0.2% and 1.3% respectively, due to a rebound in fuel prices.

 

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