I'm no economics whizz, and just guessing, but the continuing strenth of the $A might be a factor. Australian consumers are still in a feeding frenzy over cheap goods still flooding in, aren't they? Paid for in effect by us flogging off our cheap minerals so that foreigners can continue to produce the cheap crap for our delectation.

If the dollar goes down, then the coal and other stuff becomes even cheaper for the Chinese and their cheap crap is a little less cheap for us to buy, isn't that how it works? So, what are the consequences for the $A and the balance of payments, given continuing upward pressure on interest rates, Saul?

I think The Reserve Bank and our Govt too often react to the symtoms of our economic maliase,rather than treating the disease.

The fundamentals of any economy are productivity,underpinned by intelligence and technology.In trying to compete in this unlevel playing field ,we are losing both.Our balance of payments deficit continues to accelerate and we just seek to flog off our resources at fire sale rates to maintain our lifestyles.

Intelligence, discipline and having tribal commitment to our country is the secret.We have to encourage a better quality of immigrant who not only have the skills and intellence,but also have the commitment and courage to embark on new business ventures.

Taxing the life out of motivation to support the socialist state is not a good start.Letting multi-nationals dominate our domestic market will also make us servants to the international share market.

It is time for some lateral thinking.I think it is time we gave tax incentives for the working poor to share in their wealth via the share market,and reduce welfare dependance.

We also have to give more financial support for Aussie innovations, since both the US and China are growing fat on our inventions.All our Solar technology will now go to China.Why wasn't there Govt support as happens in China?

We are a lazy bunch of fools,and our children will pay the price.

What say you Saul?

The Great Debate.
Australia had one of the worlds strongest currencies in 1900.
In 1967,the Aussie dollar was worth 60P UK,today the Aussie dollar is only worth 30P.
My figures may not be entirely correct as currency exchange seems to be a the mercy of who exchanges.
The fact I am proposing is that the Aussie dollar at the turn of the last century,when gold was king made the Aussie dollar expensive.
today with a similar situation where the world price of Minerals,including Gold are at a record price the Aussie dollar is at a very low price.
Why?
It seems that the reserve bank is keeping the Aussie dollar low to increase internal inflation.
The wages paid to Australian workers have dropped significantly since the 1960's.An unskilled worker could purchase a home doing two jobs in just five years.When the average small home was worth $10,000 in Melbourne and Sydney.
Today with a House price averaging $500,000 the unskilled worker would have to save $100,000 per annum to pay for the same house.
Given that today the same unskilled worker pays 30% tax instead of the 1967 rate of 10% tax.An impossible task.
So what went wrong.
The Federal government has been pandering to the interests of the few.
Australian investments overseas have seen a drain on the Aussie dollar everytime Telstra announces it is investing in Asia the Aussie dollar is "hit for six".
When this suicide of the Aussie dollar stops Austeralians will regain their Real Dollars worth.

Brock ,I thought that when Malcolm Fraser floated the Aussie dollar,market forces determined it's value.How does the Federal keep it's value low?

the nominal exchange rate, or 'spot rate' that we hear about on the news each night is set in the 'forward' or 'futures' market. it is set so that you can't make money by borrowing / lending in a different currency and using the forward exchange rate to make money.

ie. Australia's sporting a healthy 6% overnight cash rate. the differential of this rate above /( below ) world interest rates is also the extent to which the forward value of the AUD lies below /(above) the current spot rate.

ok, commodities. at present the price of commodities is relatively high, due to strong global growth etc. PK and Arjay, the thing to remember about commodities is that they are an homogenous good. that is, one tonne of coal is the same as the next. as a result, Chip Goodyear of BHP doesn't wake up in the morning and decide he'll drop the price of nickel that day - we don't 'flog them off cheaply'. they are determined by market factors, supply, demand etc.

given that world growth is strong and that has resulted in upward pressure on prices it's only natural that we'd want to supply more - 'make hay while the sun shines' type of thing. if the price halved you wouldn't want to invest to increase production, you would do quite the opposite.

now, this increase in the price of commodoties has positively increased Australia's terms of trade. up around 30% (i think) since 2003, meaning that our exports are now more expensive and imports are cheaper. this can be looked at as a positive or a negative. however you look at it though, it is serving to reduce the growth of our current account defecit which is certainly a good thing. and given the high levels of investment from the resources sector it may not be too long before we see a gradual reduction in the current account deficit.