Ken Henry has made a speech today pointing out the obvious that the mining boom doesn’t benefit everyone and that other traded goods sectors are badly affected by the high value of the dollar.
Well, yes, but what are the policy implications? Kill of the mining boom? Say with a punative tax?
Or realise that the mining boom will at least level out as supply in the key resources increases from a number of sources, inside and outside Australia. In other words, there is every reason to expect that the terms of trade are pretty close to their peak in any case. And in the meantime, provide maximum flexibility to allow resources to transfer to the booming sectors in order to maximize the gains from this fortuitous turn of events.
Philip Lowe of the Reserve Bank has also spoken today and made the eminently reasonable point that the best predictor of macroeconomic conditions in Australia is now the macroeconomic conditions in China and no longer the US, as was the case several years ago.
I think the best advice Henry can give to his political masters would be to reduce the growth of government spending savagely, thereby reducing the upward pressure on the Australian dollar.