In a webinar hosted by the Australian National University Monday, RBA Governor Philip Lowe mused about the recent strength in the Australian Dollar (AUD), and so-called 'Zombie' companies.
"RBA Governor Philip Lowe said on Monday that Australia's post-coronavirus recovery is in better shape than most other countries, and therefore the recent strength in the Aussie dollar was not suprising. "At the moment, I think it's really hard to argue that the Australian dollar is overvalued." he said. Lowe did not indicate that the RBA was not totally oblivious to the rise however, noting that it could be an issue at some point, "but I don't think we've reached that point yet."
On unemployment, Lowe said the RBA had overestimated the likely impact of the coronavirus pandemic, as data on last week showed hours worked in May were down 10% compared to a predicted 20% fall.
On the prevalence of so-called 'Zombie' companies, that is, companies who are likely insolvent but likely being kept alive by the Jobkeeper payment, Lowe said "Remember, those zombie firms, if they exist, are employing people, which is good."
Whilst touting that Australia has "a fantastic set of underlying fundamentals", Lowe reaffirmed the central bank's commitment to do "whatever it takes" to boost growth and stabilise the economy. Indeed interest rates are likely to be on hold for the foreseeable future as "We do face a world where there'll be a shadow from the virus that will last for quite a few years. People will be more risk averse, they won't want to borrow..." he said. As with previous statements he urged a greater response on the fiscal side of the ledger saying that without it "we'll just...meander and kind of have slow growth."
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