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The Resources Boom and Economic Policy in the Long Run
Author(s) -
Sheehan Peter,
Gregory Robert G.
Publication year - 2013
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.1467-8462.2013.12023.x
Subject(s) - boom , economics , liberian dollar , deflation , stimulus (psychology) , monetary economics , investment (military) , monetary policy , shock (circulatory) , fiscal policy , dutch disease , international economics , macroeconomics , economic policy , exchange rate , finance , medicine , psychology , environmental engineering , politics , political science , law , engineering , psychotherapist
Australia's current resources boom has three elements: high terms of trade, strong investment and increased resource exports. For a decade, the net effect has been strongly positive: the boost to incomes and activity from the first two has more than offset the impact of the high Australian dollar. But, both resource investment and the terms of trade will fall in due course and the economy will face a major deflationary shock. A sustained policy response will be needed that recognises the limits of monetary policy and hence involves fiscal stimulus, together with innovative approaches to ensure that infrastructure investment rises rapidly .