It is clear that both demand and supply side policies are necessary. The lesson of 2012 has taught us that the crisis of confidence in the euro was also caused by uncertainty about the future of the single currency – which turned out to be unfounded.
The high level of the Australian dollar has also weighed on manufacturing over recent years.12 Those manufacturers with more exposure to the construction industry (including in mining) and focused on more complex, highly skilled techniques have tended to fare better than those exposed more to the pressures of international competition from emerging markets.