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.
Delivering a keynote speech in Melbourne, Ms Gillard said there had been a global drive to hold Australian dollar-denominated investments and a record surge by investors buying Australian government bonds.
She told the Australia-Israel Chamber of Commerce today another driver for the currency had been investors using it as a substitute for betting directly on growth in the region, especially in China.
This was Australia's reward of the Government's fiscal discipline, she said.
"Add the relative woes of European economies - touching even traditional currency strongholds like Switzerland - and for the first time in history Australia is being referred to as something of a global 'safe haven'," she said.
"What is certain from all this is our dollar is likely to remain relatively high for years to come."
She said while Australia's economic fundamentals are strong, Europe's problems are "serious and complex".
"We can expect daily choppiness and immediate reactions to overnight news to continue to colour the mood of market commentators and participants," she said.
"There will be more ups and downs in global markets for as long as it takes for Europe to get its house in order."
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