/ 21 November 2012

Australia welcomes move to count its dollar as reserve currency

Money changer Tirth Acharya of India displays a selection of US dollars
Money changer Tirth Acharya of India displays a selection of US dollars

The country on Wednesday praised the International Monetary Fund's move as an endorsement of its economic strength.

The mining-powered Australian dollar has consistently traded near or above parity with the greenback for more than two years as commodity prices have boomed on the back of China's rapid modernisation.

The International Monetary Fund said late last week that the Australian and Canadian dollars ought to be considered for inclusion in its so-called Currency Composition of Official Foreign Exchange Reserves (Cofer) reporting of foreign exchange reserves from next year.

Cofer currently counts foreign holdings of US dollars, the euro, pound sterling, Japanese yen and Swiss francs.

Australia is among 10 nations counted under "other currencies" but the IMF said a "relatively high number" of countries were now reporting Aussie dollar holdings and they "are to be considered for separate identification in Cofer reporting".

Treasurer Wayne Swan welcomed the IMF recommendation. "This IMF decision is yet more confirmation that Australia is seen as a safe haven for global capital and one of the most attractive investment destinations in the world," Swan said in a statement.

"While we know the high dollar makes life hard for some sectors of our economy, it also reflects our strong fundamentals during the ongoing and acute volatility experienced in the global economy."

Economic growth 
Swan said Australia's economy had grown 11% since the onset of the financial crisis and was now the world's 12th largest.

Reserve Bank of Australia governor Glenn Stevens downplayed the move as a "classification change" and said the Aussie dollar had been a "small reserve currency for quite a few countries for about 25 years".

"Asian central banks in particular have had substantial Australian dollar reserves for quite a while," Stevens said in remarks following a speech on Tuesday night, reported by the Australian newspaper.

Stevens said the IMF comments were not "actually any particular endorsement that makes us more of a reserve currency than we were".

But he said it would help shed light on just how much Australian currency was being held by central banks, in particular those in Asia. "We don't know how much, as they won't say," he said. "[Now] we may find out." – Sapa-AFP