I’m home, so the Aussie dollar goes up

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Oh the Prime Minister’s Abbottism, saying “shirtfront” when he only meant “front” (he’s a rugby man, knows nothing about aerial ping pong), was good for a little international laugh if anyone cared, while the domestic political competition to be the most outraged over the MH17 tragedy is, well is – bordering on something.

From a distance, it’s no wonder this wonderful, spoilt little rich country has a strong currency, despite the Reserve Bank’s strong wishes.

There is more to Australia’s relative position than iron ore prices and Chinese tariffs on coal. We tend to lose sight of that, as well as the volume of iron ore and coal shipped.

Ask yourself: “If I had a hot squillion or two, where would I feel safe parking a fair whack of it?” Australia has to feature in your answer.

It’s one of those rare stable countries with obvious assets, educated people, low government debt and a central bank that has kept some ammunition dry. They will even pay some interest on deposits.

Despite efforts by some (obvious) parts of the media and politics to beat up security threats and buy into conflicts, the country is safe. The island continent thing works well for us. We’re a long way from the Balkans and Middle East. Thanks to our travel patterns and infrastructure, we’re less likely than many to cop ebola in a meaningful way.

Millions of well-off people would like to live here, never mind those who aren’t well off but would risk absolutely everything to do so. We have a tap that can turn on people of motivation and drive at will.

Yes, if China proved to be less pragmatic in the South and East China Seas than several thousand years of history suggest, we would be affected, but so would the rest of the world. As for economic growth rates, remember that China wants to slow to a sustainable pace. GDP growth there of 7-point-anything is nice now and 5 will be good not too far down the track.

Elsewhere in the big league, as the US ceases printing money, the greenback naturally recovers and the American economy has been getting a lift from cheap gas. There aren’t many short-term unemployed in the global growth bright spot.

But economics is always a relative game with constantly moving goal posts. It is interesting that Saudi Arabia is making noises about not cutting production in the face of weak oil prices. And within the US is a population more like that of a developing nation than the world’s richest. With Americans continuing to kill each other faster than anyone else can manage to, plus a renewed and open-ended war to finance, Washington continues to have plenty of problems even without a Republican in the White House.

In Europe, now the German economy is suffering doubt and consternation. They do consternation well there – the next two biggest European economies could do with more consternation. Further down the European scale, even with good times it will take a decade to get unemployment down to a merely bad level. And Europe’s demographics aren’t flash.

Mention demographics and there’s Japan. For Abenomics to be more than a flash in the mega-debt and free money pans, the third arrow overturning hundreds of years of social structure has to hit its target – Japanese women have to want to stage a revolution and succeed in doing so, changing Japanese men in the process. How long did ours take, arguably starting from an easier position?

So, relatively speaking, our problems aren’t much. And in a curious sort of way, the bitsy nature of the world economy isn’t going too badly for us at the moment. That was noted over the weekend by AMP’s Shane Oliver – someone who does a nice line of perspective:

“A downgrade to the IMF’s outlook for global growth is clearly weighing on sentiment. The downgrade was only modest, taking its global growth forecasts down by just 0.1 per cent to 3.3 per cent for 2014, and down by 0.2 per cent to 3.8 per cent for 2015, but it nevertheless highlighted the softness in global growth momentum outside the US.

“However, it was hardly new news, as weakness in Europe, Japan, Brazil and Russia is well known, and is just a repeat of the pattern seen in the last few years where stronger global growth is forecast in the year ahead only to be revised down as we get closer to it.

“In some ways the uneven, ‘not too hot, not too cold’ global economic expansion is not bad as it means we remain a long way from overheating, higher inflation and aggressive monetary tightening.”

Ah, the silver lining. Oliver had been warning for a couple of months that we were about due for a correction and that September/October tended to be good months for such things, but he only views it as a normal correction providing some buying opportunities ahead of a Santa rally.

Big institutional investors quite like a correction. While small investors tend to gnash the odd tooth over softer share prices, the big players see a chance to employ some of the cash pile they started building up as soon as the market was hitting new highs – a chance to do something other than hugging the index.

This is a country where even bad news provides opportunity.

So, yes, there is a very strong and well-put argument for the Australian dollar to weaken further – but there also are arguments for money wanting to stay here.

It would be a nice thing overall for our economy if the Aussie did fall a bit more. But it probably won’t happen until the next time I’m overseas.

Michael Pascoe is a BusinessDay contributing editor.