In our globalised world, understanding our international environment requires tracking current developments in the world economy. Measured in US dollars, annual global gross domestic product is now somewhere over $72 trillion. This figure incorporates all of the output in terms of goods and services within states, and also between states. The global trading system represents around US$22 trillion of economic activity. Outside of the ‘real economy’, global financial asset markets are now worth well over US$600 trillion. For perspective, Australia’s gross domestic product is worth around US$1.5 trillion.
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 for International Policy.
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.
What the Lowy Institute does
The International Economy Program regularly produces analysis on the major components of the world economy, principally in the areas of trade, finance, macroeconomic policy, and global economic governance. The G20 Studies Centre, established at the end of 2012, places a particular focus on the role of the G20 as the primary global economic governance response to the global financial crisis.
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.