MB has for a long time championed an externally led post mining-boom adjustment for Australia. By that we’ve meant that when Australia found itself with an enormously bloated real exchange rate in 2011, so bloated that everything tradable was being thrown into the sea, including the car industry, the nation needed to do what it took to deflate itself back to competitiveness. Preferably engineering as soft a currency as possible.
The powers that be in the RBA and Treasury decided to do the exact opposite, pushing for domestic reflation via a revitalised housing bubble. As such, we’ve struggled ever since to improve competitiveness at all. And even when we finally did, it was in large part thanks to US tightening which strengthened the USD, as we fought it all the way by propping up the housing monster.
This is what MB called the Dumb Bubble.
