US decision to taper QE positive for Australia

The US Federal Reserve's actions of tapering quantitative easing policy indicate confidence on its part that the US economy is moving towards a sustainable economic recovery, said Saul Eslake, Australian chief economist. Saul Eslake, chief economist of Bank of America Merrill Lynch, told Xinhua that the Fed's decision is a good news for the world economy and for smaller economies that depend on trade. He said that the U.S. is no longer in need of as much support from monetary policy as in the years since the financial crisis began. From an Australian perspective, Eslake noted that to some extent that the Fed's decision means a stronger U.S. dollar, it also means a weaker Australian dollar, which would be in line with the Reserve Bank of Australia's wishes. The central bank has always thought the Australian dollar remains "uncomfortable high", so Eslake said the Fed's decision should help to achieve 'more balanced' growth in the Australian economy, as the resources investment boom winds down. "Ordinarily, a stronger U.S. dollar means lower commodity prices denominated in U.S. dollar -- and we have seen that with regard to gold and to some extent copper, but not with regard to the commodities that matter most to Australia -- iron ore and coal, " he added. Eslake concluded that the Fed's decision is a positive one for Australia, but it doesn't alter his view that Australia's economy will continue to experience below-trend growth, with gradually rising unemployment and other components of investment (other than housing) remain sluggish.