Exchange Rates: The Long View on High Times May Not Be So Awesome

The Australian dollar's seemingly inexorable rise – with predictions that the exchange rate may tip US$1.50 before Christmas – is being reported by the media with awe. Internet shoppers and offshore holidaymakers are revelling in the disparity. But economists take a more tempered view of the big bucks high that's powered by the commodities boom. In the long term, the floating dollar may present risks to other parts of the economy and dampen innovation, they say. And there's the threat of inflation. James Morley, a professor of economics at the Australian School of Business, weighs up the likely impact of the dollar's 30-year high.