But the share of Australia’s real economy engaged in international trade, and the extent to which Australians’ financial assets are traded internationally, have grown over the same period. No doubt this was mostly a result of the general opening up of the economy to the international system, but it is difficult to support the claim that exchange rate variability has seriously impeded these developments.
On the contrary, I think that the most serious potential problem for the internationally exposed sectors is not short-term exchange rate variability, but medium-term misalignment in the exchange rate. Allowing market forces to move the exchange rate makes such an outcome much less likely.