From the SMH:
Ross Garnaut, one of the authors of the float of the Australian dollar 30 years ago, warns that the Reserve Bank might have to consider intervening to push it down to minimise the recession he sees coming as the mining boom goes bust.
Professor Garnaut, of the University of Melbourne, says he would rather see the RBA cushion the economy’s looming fall and bring down the overvalued dollar by cutting interest rates sharply to bring them closer to those of other Western countries.
But if conventional means fail to cut the dollar’s value and relieve the pressure on other tradeable industries, he told a seminar at the Australian National University, the Reserve should consider following its Swiss counterpart’s example and put a cap on the dollar’s value.
…He said the fall in China’s use of coal in electricity generation last year was a forerunner of its shift to a less resource-intensive phase of growth, which would trigger a plunge in Australian mining investment. ”We can be pretty sure that we’ll be [losing] 5 or 6 per cent of GDP from expenditure, and that’s one hell of a fall,” he said.
