Premium
Dutch Disease in Australia: Policy Options for a Three‐Speed Economy
Author(s) -
Corden W. Max
Publication year - 2012
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/j.1467-8462.2012.00685.x
Subject(s) - dutch disease , lagging , protectionism , boom , exchange rate , economics , private sector , government (linguistics) , terms of trade , international economics , monetary economics , economic policy , business , economic growth , medicine , linguistics , philosophy , pathology , environmental engineering , engineering
‘Dutch Disease’ refers to the adverse effects through real exchange rate appreciation that the mining boom can have on various export‐ and import‐competing industries. The distinction is made between the booming sector (mining), the lagging sector (exports not part of the booming sector and import‐competing goods and services) and the non‐tradeable sector. What should the government do to reduce this Dutch ‘disease’? The principal options are: do nothing, piecemeal protectionism, moderate exchange rate effects by running a fiscal surplus, combined with lowering the interest rate, and possibly establishing a sovereign wealth fund. The costs of the latter measures may be considerable .