Another good example today of the problems associated with having conflicted business executives with majority control of the RBA Board. BlueScope Steel's Chairman and RBA Board member, Graham Kraehe, who has recently had to sack a bunch of staff as a consequence of the structurally high Aussie dollar, has today warned about the risks of recession (and implicitly cautioned the RBA about the risks of raising interest rates, which may be required even if growth is low and unemployment is increasing). Observe how in Dow Jones's reporting Kraehe is presumed to be representing the RBA:
*DJ RBA's Kraehe: Australian Economy Could Be Hollowed Out Post-Mining
SYDNEY (Dow Jones)--Australia's economy risks being hollowed out by the country's mining boom and the country faces the prospect of a downturn once commodity prices fall, Reserve Bank of Australia board member and BlueScope Steel Ltd. (BSL.AU) Chairman Graham Kraehe said Monday. 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,and the Australian dollar is likely to stay well above historical rates for an extended period, he said. "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," 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.
