The Reserve Bank should heed the advice of its former board member Warwick McKibbin and intervene to limit the strength of the Australian dollar, the CFMEU said today.

Mr McKibbin noted that the real value of the dollar is being distorted by foreign central banks rushing in to invest in Australian currency as a safe haven from global economic turmoil.

CFMEU National Secretary Michael O’Connor said the most vulnerable sectors of the Australian economy are under extreme pressure from the overpriced dollar and the need for RBA intervention was clear.

“We currently have the perverse situation which is working to the advantage of foreign central banks over Australian manufacturers,” Mr O’Connor said.

“More than 30 of the world’s central banks have added Australian dollar securities to their foreign reserve holdings. This is fundamentally changing the way our dollar is valued – to the detriment of our national economy.

“Since the dollar was floated it has been joined at the hip to global commodity prices, so there has been limited need for the RBA to intervene. Today’s situation, however, is very new – and it demands a new approach from the Reserve.

“Our overvalued dollar is hammering the competiveness of Australian manufacturing. If we don’t do something, we will wake up from this episode to find that the mining boom is over, the global economy is recovering, but there is no Australian manufacturing sector left.

“The RBA would be failing in its duty to allow that to happen. There is nothing holding the Reserve Bank back from intervening aside from tradition.”

Mr O’Connor noted that the RBA could also help drop the value of the dollar by lowering the official cash rate.

“Of course limiting the strength of the dollar is not the only tool the RBA has at its disposal,” Mr O’Connor said.

“The most obvious and simple way the RBA board can put downward pressure on the Australian dollar is to lower rates this Tuesday.”

Michael O’Connor (CFMEU) 0418 550 831 / Anil Lambert (Media) 0416 426 722