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Global Economy

The ebbs and flows of global economic conditions, trade and capital flows, thus have substantial implications for the Australian economy, and Australia’s major regional trading partners. Understanding the broad trends, and identifying emerging challenges and opportunities within the global economy, is central to the work of the International Economy Program at the Lowy Institute.

The highly integrated nature of the modern global economy became especially evident during the 2008 global financial crisis. What began as a localised problem within the residential asset-backed securities market in the United States, eventually brought down major financial firms across the Western world, and ultimately pushed the United States and Europe into a deep and prolonged recession. Although global economic growth has recovered somewhat since 2008, it is still much lower than pre-2008 trends, and the hangover from the crisis has manifested itself in the form of high unemployment levels throughout much of the developed and developing world, as well as an increasing level of inequality both within and between countries.

Understanding the economic rise of Asia, and particularly of the growing middle class within Asia, is also crucial to the broader work of the Lowy Institute. Political economy analysis on major players in the region, chiefly China, India and Indonesia, features heavily in the work of the East Asia Program and the International Security Program.  

Is the Fed acting as the world's central bank?

'The Federal Reserve enters its second century as the closest the world has to a global central bank.' So says Ted Truman, who speaks with some authority as he played a key advisory role for many years with the Fed (the US central bank) and the US Treasury.  However, Truman's detailed account of

2014 Australia-India Roundtable Report: Outcomes Statement and Summary Record of Proceedings

The relationship between Australia and India has reached a new maturity, based on deepening connections between their societies, economies, education sectors and policy establishments. This positions these two democracies to work together to advance their interests in a shared Indo-Pacific region.&

France, the sick man of Europe?

France is not doing well. The crisis is evident from the ubiquitous beggars in the streets of Paris to its bad, and worsening, economic data. President Hollande's wishful notion of a merely temporary French lapse in the economic competition with Germany has ended; defeat has been conceded.

A corrective to that robotics video

Earlier this week I posted a rather terrifying video about the implications of robotics for the global economy and employment. Thanks to Stephen Grenville for pointing me to this critique of the video. The piece has a couple of key arguments, the first refuting the notion that human workers will

Are we measuring international trade correctly?

Perhaps the most fundamental change in international trade in recent decades has been the development of multinational 'supply chains'. The production process has been 'unbundled', with different stages of production taking place in different countries. An iPad is assembled in China, but only $10 of

Australia's economic diplomacy: Enlightened self-interest?

Almost a year since the Coalition took the reins of government and introduced its policy of 'economic diplomacy', a term which was probably foreign to many Australians at the time, Foreign Minister Julie Bishop and Trade and Investment Minister Andrew Robb launched the Government's Economic

Humans need not apply: An economic horror movie

Holy crap, this video is terrifying. From the narration: We have been through economic revolutions before, but the robot revolution is different. Horses aren't unemployed now because they got lazy as a species; they're unemployable. There's little work a horse can do that do that pays for its

China: Economic war and the humbling of multinationals

'I really worry about China. I am not sure that in the end they want any of us to win', confided GE boss Jeff Immelt to a group of fellow multinational business-people dining in Shanghai in 2010. So far, GE has mostly stayed out of trouble in China. But many other Fortune 500 companies have been

What next for multilateral trade negotiations?

The Director-General of the World Trade Organization is sounding despondent after the latest setback to the December 2013 Bali Agreement. Meanwhile, a survey of exporters has given some endorsement for the alternative path of free trade agreements (FTAs). Is there any hope for furthering the

G20 must save the WTO, among other things...

As John Lennon wrote, 'life is what happens when you are busy making other plans.' How true for Australia's plans for the G20. Life is not being kind in the lead-up to the Brisbane G20 Summit. The head winds for the summit so far include: International organisations (the IMF and World Bank)

G20 2014: The G20 Brisbane Summit, inequality, energy and anti-corruption

The 12th edition of the G20 monitor contains an overview from John Lipsky on the G20’s role in global governance after the global financial crisis; a paper by Geoff Weir on the G20, Thomas Piketty, and inequality; thoughts from Hugh Jorgensen and Christian Downie on multilateral energy governance

BNP Paribas fine is G20's dollar dilemma

There are many countries which do not much like the central role of the US dollar. But while they generally (and grudgingly) agree that there is not much to be done about it for now, a punishment recently meted out by US financial regulators against BNP Paribas (BNPP) has incensed European leaders

Just how expensive is renewable energy?

I raised this topic recently when The Economist pointed to a new Brookings study which argued that the cost of renewables had been severely underestimated. There was some pushback in the comments thread, and now I see that Green Tech Media, an American green energy industry website, has also

Credit rating agencies must do better

Standard and Poors' credit ratings. (Wikipedia.) Foreign investors learn about the Australian economy from a variety of sources, but the credit rating agencies (CRAs) have a special place, as many investment managers are committed to following the rating agencies' assessments. As well, the CRA

G20: The case for an inclusive growth target

Earlier this year Treasurer Joe Hockey negotiated a significant commitment among G20 Finance Ministers to aim for an additional 2% of global growth over the next five years. As countries develop their action plans for achieving this goal in the lead-up to the next G20 Finance Ministers' meeting in

From the comments thread: Green energy

Two reader comments I'd like to flag in response to my piece highlighting new research by the Brookings Institution's Charles Frank, written up in The Economist, which suggests renewable energy is still way too expensive to take over from coal, oil and gas. Here's OfKember: The basic inadequacy

The limits of Indonesia's anti-corruption campaign

'Fight corruption!' A Corruption Eradication Commission event in Bandung in 2009. (Flickr/Ikhlasul Amal.) Indonesia's reputation for corruption in not in doubt: it comes 114th out of 177 in Transparency International's ranking. For more than a decade, the Corruption Eradication Commission (KPK)

Time to put security issues on G20 agenda

Given developments in the Ukraine and tensions elsewhere in the world, the time has come to put security and geo-political issues directly on the agenda for the meeting of G20 leaders, and for those leaders to bring their foreign ministers to the Brisbane Summit. Soon after President Bush announced

China: Climate wrecker or climate leader?

Lisa Williams is author of the new Lowy Institute Analysis, China's Climate Change Policies: Actors and Drivers. The views expressed here are her own and do not reflect the views of the Department of the Prime Minister and Cabinet or the Australian Government. As the world prepares to fight for (

The long term damage of the global financial crisis

One of the messages of John Edwards' Beyond the Boom is that Australia sailed through the 2008 crisis unscathed. As a result, Australia's GDP in 2013 was 16% higher than in 2007, while many of the G7 countries had barely regained their pre-crisis GDP level: the strongest rebound, in Canada, was only

Will Putin go to the Brisbane G20 Summit?

One consequence of the tragedy over MH17, apparently at the hands of Russian-backed separatists, is that it raises the question of whether President Putin should attend the Brisbane G20 Summit in November. Some newspapers are reporting that Australia is threatening to ban Putin. The predominant

Australia's carbon price repeal: The global context

With the repeal today of Australia's two-year-old carbon pricing scheme, the Abbott Government has formalised Australia's transition from climate laggard to climate wrecker. But just how serious a blow to global climate efforts is this repeal? To answer this question we can compare Australia

Dubai seeks world aviation dominance

One of the first posts I ever wrote on The Interpreter in late 2007 was about Dubai's evolution towards becoming 'the centre of the world'. That is, a global aviation hub geographically placed to allow one-stop travel between any two places on the globe. Now Vanity Fair has this vivid portrait of

Infrastructure: An opportunity for emerging economies

Low global interest rates since the 2008 global financial crisis seem to provide an ideal opportunity for boosting infrastructure investment. Bond rates have been historically low, so many governments can borrow at less than the rate of inflation. There is spare productive capacity in most advanced

Australian economic reform: The next generation

Growth in HALE index, Intangible GDP, net national income and GDP, 2005-2014. John Edwards' Beyond the Boom tilts effectively against Australia's congenital Hanrahanism. It points out the extent to which we managed to finance the wild ride of the boom (the massive surge in mining investment, from 2

Australia's economy: Stimulus, saving and the GFC

John Edwards' Beyond the Boom is a welcome follow-up to his 2006 Quiet Boom, which I reviewed at the time in conjunction with Ian Macfarlane's Boyer Lectures. I agree with the argument that economic reform should not be sold on the basis of a faux crisis or economic failure narrative. If proposed

Resources boom: Australia's misplaced pessimism

'We'll all be rooned,' said Hanrahan, 'before the year is out.'   Pessimism is a key part of the great Australian tradition, reflecting a history of booms and busts. It has infected the debate on the mining boom of the past decade. But how does it make sense to treat a once-in-a-century windfall

The economic impact of environmental crime

A new report from the UN Environment Programme claims that  the monetary value of 'environmental crime' — logging, poaching, animal trafficking, illegal fishing, illegal mining, etc — is between US$70 billion and US$213 billion each year.  If this upper figure is to be believed, then

Australia's economy: Luck will favour the prepared

Unemployment remains fearfully high in much of Europe, growth in the US is tepid and China may be on the verge of an unprecedented slowdown. In the midst of all this unpleasantness, Australians look around their bountiful land and ask, Can our luck last? In Beyond the Boom, John Edwards, says it

The myths of the mining boom

In widely reported censures by business leaders and economists, in warnings by politicians, public servants and journalists, we often encounter grim themes about the Australian economy. The mining boom accounted for Australia's apparent economic success in recent times, they say. But Australians

Asia's coal demand: You ain't seen nothing yet

Sam Roggeveen yesterday showed us how much demand for coal has risen in Asia during this century. Now consider what the future will hold. A recent joint publication from the International Energy Agency and the Economic Research Institute for ASEAN and East Asia forecasts what is in store for the

China's banking sector: More equity, less debt

So China's economy will soon overtake the US in PPP terms. Some commentators believe market-rate calculation is more meaningful than PPP, and forecast that on this basis China still is decades away from catching America. For here is a remarkable fact: the equity market capitalisation of the US

Spain down, but will lead Europe again

Spain is going through a rough spot. Two kings are down and its permanent aches — restless regions, high unemployment, illegal immigration from Africa — persist. And yet Spain, with its proud history, will be back at the forefront of continental Europe. 'Le roi est mort, vive le roi', say the

Cameron taking the Great out of Britain?

Strong stuff from Gideon Rachman: Will David Cameron go down as the prime minister who turned Great Britain into Little England? If things go wrong for him, he could end up presiding over the departure of Scotland from the UK – swiftly followed by Britain’s own departure from the EU. Many

Climate change: Asia leads, but not in a good way

Vox has some remarkable — and depressing — charts on why the world is failing on climate change, all derived from BP's latest Statistical Review of World Energy. Half of the world's greenhouse gas emissions now come from Asia, with China alone consuming half of the world's coal. This is the

Does inequality make a country less secure?

In the first post in this series I explored several implications of rising inequality with respect to military capacity and international security. In this post, I will explore the relationship between inequality and internal stability. The association between economic disparities and social

G20: dealing with too-big-to-fail banks, corporate tax avoidance, and development

This issue of the G20 Monitor addresses the ‘too big to fail’ dilemma of major financial institutions, combating tax evasion and avoidance through ‘base erosion and profit shifting’ (BEPS), and a report from the ‘G20 and Development’ conference hosted by the G20 Studies Centre and

When should the IMF apologise?

If you make a mistake, common courtesy says you should apologise. The IMF made a mistake in its forecasts for the UK economy — a high profile mistake. It admitted it got it wrong. But should the IMF have apologised? In 2013, IMF chief economist Olivier Blanchard publicly said that UK

Climate and energy policy merging, but where is Australia?

Australia's low level of ambition ahead of next year's climate change talks in Paris reveals more than the negative effect of domestic politics on our international reputation and economic future. The broader message to trading partners, investors and policymakers is that Australia is unwilling

Global financial crisis: Did the system really work?

Much of the mountain of commentary and analysis of the 2008 Great Recession has been either critical (Paul Krugman might be typical), or a self-interested defence (Tim Geithner and Larry Summers provide examples). Daniel Drezner's The System Worked is atypical in two respects: he was not a

Women, decision-making and the extractive industries

Members of the Publish What You Pay network at a meeting in Jakarta. Photo courtesy of author. For the last three years I have been lucky enough to coordinate the Publish What You Pay (PWYP) campaign in Australia for transparency and accountability in the extractive industries (oil, gas and

Climate change: The G20 can add value

Yesterday I gave an interview to the Sydney Morning Herald for a story published today: 'Stopping climate change talks "could hurt" G20' (p. 8 in the paper version). Here I want to offer a little more background to the three direct quotes that made it to the final story: Climate change will be

Foreign direct investment: Ten simple questions

1. Why is FDI so sensitive?  Here is an impolite truth about international commerce: governments, even 'liberal capitalist' ones, are obsessed with sovereignty. Foreign direct investment (FDI) represents a breach of sovereignty. This year's Lowy Institute Poll shows that most Australians view FDI

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