Despite the economic uncertainty arising from the tragedy in Japan, the OECD is optimistic about the strength of the global economic recovery. From the OECD newsroom today:

Growth in the G7 economies outside Japan appears to be stronger than previously projected, with accelerating private sector investment and trade boosting recovery, according to new analysis from the OECD.

“The outlook for growth today looks significantly better than it looked a few months back,” OECD Chief Economist Pier Carlo Padoan said during a presentation of the OECD’s latest Interim Economic Assessment.

“Growth perspectives are higher all across the OECD area, and the recovery is becoming self-sustained, which means there will be less need for fiscal or monetary policy support.”

A pick up in global growth, and hence demand for resources, could underpin the record highs of the Australian dollar or push it even higher, which would be good news for consumers and mortgage holders. Leading market economists are crediting the RBA’s decision to leave the cash rate steady today to the high Australian dollar, which is putting downward pressure on inflation because goods from overseas are now cheaper.

The high Australian dollar, however, is causing pain to some sectors including manufacturing and tourism. It’s possible the value of the dollar is partly responsible for the drop off in short-term visitors to Australia from overseas, as reported by the ABS today:

During February 2011, short-term visitor arrivals (492,400 movements) recorded a decrease of 2.2% compared with January 2011 (503,800 movements).

Source: Overseas Arrivals and Departures, Australia, Feb 2011

The depressing effect of the Australian dollar on tourism and manufacturing is part of the necessary adjustment that needs to occur for Australia to take advantage of the resources boom. The global marketplace is telling us it doesn’t want us to make Falcons and Commodores, or to be one giant holiday resort; it wants us to dig coal and iron ore out of the ground instead.

As a supporter of free trade, I’m comfortable with this, but I can also understand why this may cause some Australians to wonder about the future direction of our economy. If the dollar gets to US$1.10 or above, as some market economists expect, the industry policy debate is sure to become white hot.