Sunday, February 19, 2012

Holmes a Court: economy and Greece

Peter Holmes a Court in Australian Weekend Magazine 18 Feb 2011

What do you think are the risks for the Australian economy in the next decade or so?

I believe the greatest risk is if the economy becomes a "simple carb doughnut". You can make a doughnut with just a few ingredients and some sugar. It tastes OK and you feet good at the time. But not for long.

The economies that I respect are those that have maintained an educated population and are structurally diverse. Diverse economies tend to underperform in boom times but are the most resilient during times of crisis. Mining-based economies only do well during mining booms.

How do you see the EU debt crisis playing out?

People tell me the EU will muddle through. Why? Because Germany needs it to, and she can afford to help the countries doing badly. Germany has been the biggest benefactor of an artificially low euro because it includes Greece, Portugal, Italy and Spain. If they were all to fall out, Germany's export-oriented manufacturing base would be devastated.

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