This is particularly so with interest rates at their historically low levels, where the growth benefit from the fiscal stimulus will improve the debt dynamics and help service the debt in the future. [10] Foreign exchange intervention is another potential policy option. However, with the Australian dollar broadly aligned with its fundamentals, it is not clear this would be effective in the current circumstances.
The Swiss experience over the past decade (ahead of the introduction of the ceiling on the Swiss franc) illustrates the issues that can arise in terms of the effectiveness of foreign exchange intervention when a currency is not far from its fundamental value. It is also important to remember that the exchange rate is a relative price.