Above is an excellent video interview screened last night on ABC’s The Business with Professor Bob Gregory, former Reserve Bank board member and the father of Australian Dutch disease diagnoses.
In the interview, Gregory discussing the “deflationary shock” coming to Australia as the mining boom unwinds (i.e. falling commodity prices and lower investment), which is likely to lead to a four or five year period whereby income growth and employment come under intense pressure.
Gregory also argues that lowering interest rates will only provide minor support to the economy (since they are so low already and there isn’t much scope to cut further), necessitating increased fiscal spending by government, preferably on productivity enhancing infrastructure.
Overall, it’s hard to disagree with Gregory’s prognosis and I highly recommended that you watch the entire interview for yourself (The original HD version is available here).
