Prime Minister Julia Gillard expects the Australian dollar will remain relatively strong for years to come, driven by its new found "safe haven" status and as investors use it as a proxy currency for the Asian region.
Hate to tell you, Prime Minister, but the Australian dollar is not a safe haven. In reality there's only one safe-haven currency and that's the US dollar. It's still the world's reserve currency and that's why countries such as China and Hong Kong peg their own currency to the US dollar. That’s why commodity futures such as Oil, Gold, Copper, Wheat and Lean Hogs also trade in US dollars.
By calling the Australian dollar a ''safe haven'', the PM is inferring that parking money in our local currency is a safe bet. But the Australian dollar is one of the most volatile currencies as the chart below illustrates.
Politicians should be smart enough to know that they should not willy-nilly dispense financial product advice especially when they aren’t licensed by ASIC to do so.
ASIC RG 36.4 – Defines what is “financial product advice”?
A recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice under s766B if:
(a) it is intended to influence a person or persons in making a decision on a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products, or could reasonably be regarded as being intended to have such an influence.
Fortunately no one believes what the Prime Minister says these days so the likelihood of anyone following her Australian dollar recommendation is rather low.
