(23 August 2011 – Australia) Reserve Bank of Australia (RBA) board member and BlueScope Steel chairman Graham Kraehe said the country’s economy risks being hollowed out by the mining boom.’There is an absolute risk that we could well and truly find ourselves in a hollowed-out economy that was living on the mining boom,’ Mr Kraehe said in an interview with Dow Jones Newswires.
‘If you look at the 1970s and 1950s, Australia had terms of trade that were right up high. Those booms ended in recession and this one is a bigger and longer boom,’ he added.
But the country’s financial resources were insufficient for it to follow the example of Switzerland and Japan and intervene to suppress the booming local currency.
Consequently, the Australian dollar is likely to stay well above historical rates for an extended period, he said.