Australia can weather a slump in mining investment as low interest rates and infrastructure spending spur other industries, while Japan could return as the nation’s biggest trading partner, economist John Edwards said.
Replacing 2 percent to 3 percent of gross domestic product with non-mining sources of growth over five to six years will be “onerous but not difficult,” the Reserve Bank of Australia board member wrote in a paper for the Lowy Institute titled “Beyond the Boom.” A lower Aussie would also help, he said.
The assessment is in part a rejoinder to debate on the economy that’s often based on a false premise of failure, Edwards said, with pessimism reflecting an historic reliance on drought-prone farm output. Extension of Australia’s economic expansion, which began before the fall of the Soviet Union, will depend on individuals and businesses in areas like services discovering how to tap opportunities in Asia, he said.
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