Should we really celebrate parity?
If you blinked, you might have missed a landmark moment, or you might have just been sleeping.
The Australian dollar reached parity with the greenback for the first time since being floated in December 1983 at 11:18pm (AEDT) on Friday 15 October.
The currency breached the psychological barrier and hit $US1.004 during European trading just moments after a speech from US Federal Reserve chairman Ben Bernanke regarding further weakness in the US economy.
The unit had not traded at the $US1 mark since July 28, 1982.
But by 3:04am (AEDT) on Saturday it had retreated to $US98.84.
The last time parity was seriously discussed as a possibility was in 2008 ahead of the crash of Lehmann Brothers when the dollar hit 98.5 US cents. But as the global financial crisis unfolded, it plummeted to 60 cents.
Federal Treasurer Wayne Swan said the milestone reflected the strength of the Australian economy.
“The government supports a floating currency, which has served our nation well as a shock absorber against global events for more than a quarter of a century,” Mr Swan said.
“But we know that there are swings and roundabouts, and while the dollar has beneficial impacts for consumers through cheaper imports, it also makes life tougher for some sectors of our economy such as manufacturing and tourism.”
David Bloom, HSBC’s head of currency strategy in London, told Australians not to be happy with the situation.
He said the Australian dollar is “massively overvalued”, and achieving par with the greenback is not something to “be celebrated”.
“The market was determined that it reached parity,” he said.
“I guess when you are a kid, you want to touch the ceiling and you spend all your time jumping and eventually you touch it and you walk away and it is game over.
“It wanted to touch parity and it touched parity.
“In the old world, a strong currency was a vote of confidence in your economy – in today’s world of currency wars, a strong currency means you are losing the battle.”
“Most countries want a weak currency. So we say be very careful and don’t have a parity party – an overvalued exchange rate is nothing to celebrate.”
While the high-flying dollar makes imports cheaper and overseas holiday much more affordable, it puts a massive strain on the tourism, farming and manufacturing sectors.