A senior Australian banking official indicated on Friday that America’s financial dominance on the world stage might eventually diminish, though recent investor behavior during Middle East tensions demonstrates the dollar continues to serve as a refuge during uncertain times.
During remarks at a New York policy discussion, Reserve Bank of Australia Deputy Governor Andrew Hauser observed that there’s minimal evidence yet of any lasting erosion in confidence regarding United States financial stability, despite the greenback experiencing weakness amid trade policy uncertainties in the previous year.
“While the events of 2025 could be a sign that things have changed, what we saw was far from unique. It is surely noteworthy that the dollar did appreciate following the recent attacks on Iran,” said Hauser.
“In truth, the dollar has never been a perfect hedge for all risk-off events, appreciating most persistently during periods of funding stress associated with strong demand for the currency.”
Hauser emphasized that international investors continue purchasing substantial amounts of American assets, contradicting widespread reports suggesting money is flowing away from the US toward alternative investments in countries like Australia. He noted that investment flows into Australia have stayed consistent with historical patterns.
Nevertheless, Hauser identified one significant shift: increased capital moving into America over recent months has primarily targeted stocks rather than bonds.
This pattern indicates a potential transition away from what economists call “exorbitant privilege” – the unique advantage allowing America to borrow extensively because the dollar serves as the world’s primary reserve currency, according to Hauser.
