The sooner the US begins tapering its economic stimulus program the better, particularly for the high Australian dollar, a Reserve Bank of Australia assistant governor says.
The US Federal Reserve has said it will begin to taper its $85 billion-a-month bond buying program when unemployment falls significantly.
It will be good news for the global economy when that does happen, even if it causes disruption along the way, RBA assistant governor (financial markets) Guy Debelle told a financial markets forum in Sydney on Wednesday.
"The day when this actually comes is a desirable thing because it means that their assessment is that the US outlook is stronger," Dr Debelle said.
"When people are exiting from unconventional monetary policy because their economies are stronger and their economic outlooks are brighter, that, I think, is unambiguously a good thing and a hell of a lot better than the alternative.
"Is it disruptive along the way? Yes, it undoubtedly is going to be so, but the alternative is worse, which is that the major economies of the world have stagnation indefinitely and these sorts of unconventional monetary policies continue indefinitely - that's a hell of a lot worse than the prospects associated with exit."
Tapering would also help lower the Australian dollar, Dr Debelle said, which the RBA has previously described as being "uncomfortably high".
In the minutes of its November board meeting, released on Tuesday, the RBA said a lower Australian dollar was needed to rebalance growth in the Australian economy.
"As we've said on a number of occasions, we would prefer (the Australian dollar) be lower," Dr Debelle said.
"One major thing which will do that will be the day when the US changes its monetary policy direction.
"The sooner that day comes, the better, but that's not in our hands, that's in their hands."
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