Hmmm, a twin-bladed sword if ever there was one. So the RBA can hope for structural appreciation, and pray that the fiscalisation of global monetary policy and the demise of independent central banks does not give us global inflation. This is their latest study on the subject:
"This article reviews the empirical evidence on exchange rate pass-through to consumer prices in Australia over the inflation-targeting period. It finds that pass-through is relatively low at the aggregate level but is faster and larger for the prices of manufactured goods, which are often imported. There is some evidence that over the past decade exchange rate movements have been flowing through more quickly to retail prices for this subset of highly tradable goods. Looking ahead, the growth of the internet with the greater ability of households to compare prices and to buy from overseas are likely to result in smaller cross-country price differentials and more rapid pass-through from the exchange rate to prices."
- Posted using BlogPress from my iPad
