Australia would be a “major loser” if other nations turned to protectionism should the debate over flexible currencies fail to be resolved, Treasurer Wayne Swan has told parliament.
Mr Swan said he hoped this weekend’s G20 meeting commits to greater flexibility in currency markets.
“We don’t want to see this debate descend into another bout of protectionism – the race to the bottom,” he said on Tuesday.
“Countries like Australia would be major losers if that was to occur in the global economy.”
There is a heated debate in international forums that managed currencies, like China’s yuan, are being held down artificially to the benefit of their exporters.
Mr Swan said Australia had benefited from a floating exchange rate during the past 25 years, because it was an important shock absorber for the economy.
“It is one of the reasons why we have had 20 continuous years of economic growth.
“No other advanced economy can claim 20 consecutive years of growth.”
The current high level of the Australian dollar reflected the strength of the economy and commodity prices being at their highest levels in more than 20 years, Mr Swan said.
The treasurer conceded that a high dollar made it difficult for many exporters but noted Reserve Bank minutes of its October board meeting noted there was a “beneficial impact” on prices because of a strong dollar.
The central bank minutes, released earlier on Tuesday, said that underlying inflation was expected to remain within the two to three per cent inflation target band over the near term.
The recent rise in the exchange rate was helping to promote this outcome.