Mon August 20, 2012 1:55pm
FORMER treasury boss Ken Henry has told business the Australian dollar is likely to remain high for the foreseeable future.
Dr Henry told the Australian Industry Group forum in Canberra today it would not be prudent to bank on an early sizeable depreciation in the exchange rate.
"There is no silver bullet that is going to rapidly devalue the dollar and make things easier for Australian businesses in the immediate future," he said.
Many trade-exposed businesses have suffered under the strong currency, which has been lifted by strong demand for the nation's commodities and economic troubles in the US.
However, Dr Henry said Australia's economic policy framework - which includes a floating exchange rate, the independent setting of monetary policy and competition policy - had served the nation well.
"These things have helped to protect Australia from the impact of several economic shocks emanating from overseas," he said.
"It is important that we will build on them and resist the temptation to dismantle parts of the framework, even though we may perceive from that dismantling a short term advantage."
He also said local businesses must start acting like regional entities, by becoming part of regional supply chains, partnering with similar or complimentary foreign firms or moving parts of their operations to Asia.
Dr Henry conceded that moving components to Asia was not easy because such plans often attracted criticism from unions and local communities.
But he pointed to the example of Australian bootmaker Blundstone, which prospered from moving part of its business offshore despite being criticised.
"It is clear today that if Blundstone had not shifted elements of its manufacturing to Asia five years ago, it would have gone out of business completely," he said.