The high Australian dollar will weigh on the economy, leading to slow jobs growth in the next four years, prominent economic forecaster BIS Shrapnel says.
The "critical spark" needed to restore balanced economic growth now the mining investment boom has peaked is a significant fall in dollar's value, BIS Shrapnel said in its latest round of forecasts released on Wednesday.
The Australian dollar has averaged just over 93 US cents in recent weeks.
But the forecasting firm said the Aussie dollar's reasonable value from the point of view of industries exposed to foreign competition is 20 per cent lower at around 75 US cents.
And it could take years to get there.
"Our forecast is that the dollar will decline, but that it will take three to four years to get below US 80 cents," BIS Shrapnel senior economist Richard Robinson said.
"The sooner the better, but Australia is too popular as an investment destination for its own good."
In the meantime, BIS Shrapnel said, the high exchange rate will sap the strength of the recovery in non-mining investment and delay the next phase of economic growth.
As the exchange rate falls, economic growth and improved confidence will spur a pickup in investment.
"But that, we believe, is at least 12 to 18 months away," Mr Robinson said.
Minerals exports growth and home building will be the main drivers of growth for the time being.
But, despite this, BIS Shrapnel forecasts that there will simply not be enough investment in other sectors to make up for the loss of mining investment.
As a result, Australia is facing the slowest four years of growth in domestic spending - consumer, business and government spending - since the recession of the early 1990s.
GDP growth will "look good", averaging three per cent annually, but one third of that will come from foreign trade.
"The upshot is that we are a long way from stable, balanced growth or what feels like a healthy economy," Mr Robinson said.
The labour market will remain weak, with job losses linked to the mining investment downturn suppressing employment growth.
"We expect that only 668,000 jobs will be created over these next four years," Mr Robinson said.
"It's little better than the last four years, and it will hardly make a dent in unemployment numbers."
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