Perhaps rather than wait for the US to fix our currency problems, Reserve Bank chief Glenn Stevens should take matters into his own hands, writes Ian Verrender.

The Tony-Barack show stole the limelight earlier this month as they canoodled on the couch and whispered sweet nothings in the White House.

While the political commentariat sifted and raked over every bit of body language between the pair - toothy grin or gritted teeth? - the real power couple in the Australia-US alliance was largely ignored.

That was unfortunate. Because for those of us Down Under, Janet and Glenn simply do not see eye to eye any more, and everyone is starting to suffer.

We may be some way from divorce, but there's a definite frostiness that, frankly, is becoming uncomfortable. And perhaps the time has come to consider separation.

Late last year, after quite some deliberation, Glenn decided he'd had enough, leaving no doubt in anyone's mind that he reckoned the Australian dollar was overvalued. Hell, he even put a number on it, something any central banker is loathe to do.

After the tiniest bit of prompting - perhaps it was even a Dorothy Dixer - he said the Aussie battler should be about 85c against its American counterpart. And for a few months after that he kept hammering home the point.

It worked for a while. In fact the local dollar already was on the slide in mid December when he urged it lower and for the briefest period he appeared a master currency conjurer.

Since then, however, it has reversed course and Glenn, deflated and defeated, has given up. No point highlighting the impotence.

Last week, though, his spirits began to rise. Over in Washington, Janet held the cards - and his legacy - in her hands.

If she could just see fit to acknowledge that America was in recovery, that given unemployment was easing and inflation rising, Americans soon will have to get used to the idea that interest rates will rise, then perhaps the greenback would shoot higher and the Aussie retreat.

To Glenn's utter dismay, she instead maintained the Bernanke rhetoric. In a speech that was long on words and short on anything new, Janet Yellen - the head of the US Federal Reserve - told a stimulus-addicted nation what it wanted to hear. Interest rates would remain barely above zero for the foreseeable future.

On top of that, the central bank would continue its radical monetary experiment, injecting $US35 billion a month into the system. It's a great deal less than the $US85 billion a month the Fed was mainlining into the arm of American financial markets. But the weaning off process - what the Fed refers to as tapering - is taking quite a bit longer than is deemed decent.

Let's face it, when Ben Bernanke was running the show, he specifically said that interest rates would stay low until US unemployment dropped below 6.5 per cent.

Well guess what? Last week it dropped to 6.3 per cent, its lowest level in five years. But Janet seems unfazed. She is pushing on with the stimulus.

Not surprisingly, financial markets greeted her pronouncements with glee. Wall Street pushed back towards its record highs, bond traders pushed rates lower and the greenback remained weak.

Janet is happy for the currency wars to continue. Australia - and Glenn Stevens for that matter - are just collateral damage amid the friendly fire.

Australia needs a weaker currency. It is vital if the economy is to transition away from the investment phase of the mining boom.

A decade of currency strength has hollowed out the economy, decimating domestic industry, both in manufacturing and services. Now it is being squeezed dry by a currency that appears to be headed back towards parity.

Commodity prices are weakening. Our terms of trade are in decline. And the bulk of the profits from mining exports is likely to flow offshore as dividends to foreign investors. And still the dollar refuses to budge.

The only reason we have a currency in the mid-90s is that we have positive interest rates and a triple A rating. Cash is flooding in to snap up Australian government bonds and any other interest security that's available.

So distorted are global financial markets by the US Fed's radical policy - now joined by Japan and Europe - that the idea of risk has been abandoned. Just as in 2007, caution has been cast aside as investors seek out anything that pays some kind of dividend or yield.

The macro effects of the strong dollar are clear. But the distortion is impacting us in less obvious, but no less important, ways. For the past two years, corporate chiefs have responded to investors' desire for yield by paying out an ever growing proportion of earnings as dividends.

They have raised dividend payments, even as earnings growth has been propped up by cost cutting rather than through improved sales. And as a result, capital expenditure - reinvestment back in the business - has suffered.

According to Australian Bureau of Statistics data, capital expenditure in manufacturing has declined 38 per cent in the past two-and-a-half years and intentions in the year ahead are set to be the lowest in 25 years.

While service industry intentions have shown a solid upswing, the trend to sating investor desires for ever greater dividends represents a significant threat to the nation's future. Less investment means stalled productivity. And without productivity growth, we will not be able to sustain our living standards.

So what should the Reserve Bank do? Continue to wait around for the rest of the world to stop behaving badly, for markets to return to rational behaviour?

Perhaps the time has come for more innovative action and greater intervention.

Instead of sitting back and hoping that a booming Sydney housing market will solve all our problems, it perhaps should consider cutting interest rates - to aid industry and weaken the currency - while imposing limits on bank lending for real estate.

Glenn Stevens is facing the greatest challenge of his career. After steering the nation through the worst financial crisis in history, deftly navigating the country through a resources boom of unprecedented proportions, his policy inaction during the past year threatens to tarnish his reputation.

It is time to stop waiting for Janet to set things straight. It's time, Glenn, to go your own way.

Ian Verrender is the ABC's business editor. View his full profile here.