$A hurting RBA's efforts to ease shift from mining, says Pimco A persistently high Australian dollar is thwarting the Reserve Bank of Australia's efforts to ease the transition of the economy away from mining, according to Pimco. Last week, RBA Governor Glenn Stevens indicated in an interview with The Australian Financial Review that he would like to see the Aussie down around US85¢. "Due to elevated cost structures and a high exchange rate, Australia Inc. is increasingly unable to compete in a fiercely competitive global market," said Pimco, in its Australia Inc. report, released on Wednesday morning. Lingering risk aversion In the year to September, growth in business investment in Australia, outside the mining sector, was near non-existent, around 0.5 per cent, said Pimco. "Although hard to quantify, this "investment drought," as [RBA Deputy Governor Philip] Lowe described it, has likely been influenced by a lingering risk aversion after the financial crisis as well as the political uncertainty that has been common in many developed countries over the past few years." Throw in the high exchange rate, making Australian exports more expensive overseas and imports cheaper for domestic consumers, and local businesses are caught between a rock and a hard place. And don't expect it to get easier next year, Pimco suggested. "Historically, it has taken two years or so for the transition mechanism between the exchange rate and the real economy to work, meaning the full impact of this year's currency depreciation is unlikely to be felt before 2015," the firm said. Australia, in recent times, has ridden the wave of a once in a generation resources boom, while many developed economies around the world have endured the hardest recession since the Great Depression. "Twenty-two years without a recession has generally meant that prices in Australia have continued to rise, while in other countries economic downturns have resulted in periods of price adjustment," said Pimco. Interest rates tipped to remain low The RBA will have to keep interest rates low for an extended period, said Pimco, as the composition of the Australia economy continues its tough transition. In terms of opportunities for investors, Australian companies with domestic exposure could stand to benefit from an eventual economic turnaround, as the US Federal Reserve begins to taper its $US85 billion per month bond-buying program and tighten monetary policy due to improvement in its own economy. The probability of the domestic yield curve flattening significantly is low. At the same time, due to the shape of the yield curve, the three-to-five-year maturity sector provides the highest expected return per unit of duration," said Pimco. Pimco also said an increase in the supply of iron ore will exert downward pressure on Australia's terms of trade, and capital inflows will continue to slow down, both of which have pushed the Aussie dollar higher.