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Economist and former RBA board member Bob Gregory expects a deflationary shock to Australia as the mining boom unwinds. This will lead to a 4-5 year period whereby income growth and employment will come under intense pressure. Gregory takes a pessimistic view towards loose monetary policy, arguing that lowering rates will only provide minor support to the economy. According to Gregory, rates are so low already that further cuts will only have a marginal effect on spending and demand. Instead, he advocates for expansionary rather than contractionary fiscal policy, particularly government spending in the areas of productivity enhancing infrastructure.


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