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The International Economy Program

The International Economy program aims to explain developments in the international economy, and influence policy. It does so by undertaking independent analytical research.

The International Economy program contributes to the Lowy Institute’s core publications: policy briefs and policy analyses. For example, the program contributed the Lowy Institute Paper, John Edwards’ Beyond the Boom, which argued that Australia’s transition away from the commodities boom will be quite smooth.

 

Experts

Latest Publications

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Trade: the US should be isolated, not accommodated

Prior to leaving for the latest G20 Finance Ministers Meeting, held at the weekend in Buenos Aires, Australian Treasurer Scott Morrison said “the trade war cannot be ignored”. He has never said truer words. Unfortunately, it seems that the G20 ministers largely ignored the trade war. While the
By Mike Callaghan
24 Jul 18
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Short-term capital flows to emerging economies

Emerging markets are under pressure from events in the global economy, including the normalisation of American monetary policy, the strengthening of the US dollar, and President Donald Trump’s trade war. Heightened risk perception is causing substantial outflows of foreign capital from the
By Stephen Grenville
13 Jul 18
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Global profit shifting

Australia’s proposed corporate tax cuts aim to attract footloose global capital by offering an internationally competitive tax rate. Much of the global tax debate, however, focuses on increasing rather than reducing company tax. Specifically, the aim is to discourage companies from shifting
By Stephen Grenville
19 Jun 18
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Keeping track of trade distortions

A tentative ceasefire has been declared in the US–China trade war, giving China time to make adjustments which might placate America. With the emphasis on the US–China bilateral trade balance, there is a good chance the main losers will be third countries: collateral damage in the conflict.
By Stephen Grenville
29 May 18
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All’s not fair in US–China trade stoush

As tense trade talks between the US and China continue, a growing chorus of US commentators seem to have concluded that, whatever their misgivings about President Donald Trump, he’s right in taking on China for its unfair trade and being an economic cheat (for instance, see here and 
By Roland Rajah
16 May 18
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Banks misbehaving everywhere

The current Royal Commission into Australian finance is uncovering headline-grabbing malpractices which have scandalised the community. These deficiencies will prove costly to the sector’s wealth and reputation. Because Australian finance largely avoided the dramas and tribulations experienced in
By Stephen Grenville
08 May 18
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Trump and “currency manipulation”

The central tenet of US President Donald Trump’s economic world view is that bilateral trade imbalances are bad for the deficit country. In this mindset, imbalances are believed to come about because the surplus country is cheating on its exchange rate to promote exports and restrict imports.
By Stephen Grenville
01 May 18
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Less is more? Employment rates and economic growth

Labour market participation, the proportion of a country’s population that is either working or actively looking for a job, seems like a boring statistical constant. In advanced economies it has hardly changed in recent decades. But the latest IMF World Economic Outlook devotes a
By Stephen Grenville
23 Apr 18
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Global monetary policy returning to “normality”

Former US Federal Reserve chair Janet Yellen promised that unwinding quantitative easing would be “the policy equivalent of watching paint dry”. Not everyone agrees. Jamie Dimon, head of JP Morgan, the most successful of the big American banks in the past decade, has voiced his concerns about
By Stephen Grenville
12 Apr 18
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Intellectual property: the big risk in US–China ties

It may be chaotic and confused, but the Trump administration is not entirely nuts. Expected to slam China with heavy penalties for appropriating the intellectual property of US businesses, the administration instead appears to be stopping short of a fundamental injury to the world’s biggest
By John Edwards
20 Mar 18
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The sky is not falling on Asia’s central banks

The nature of financial-markets commentary is that every tiny blip and ephemeral piece of news is presented as a narrative of impending doom: who wants to read a story about how everything is jogging along normally? Headlines such as “Asian central banks face white-knuckle steering as Fed
By Stephen Grenville
20 Mar 18
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CPTPP wobbles over foreign investor rights

With the Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (CPTPP) now signed and awaiting ratification by the member states, the issue of investor-state dispute settlement (ISDS) is again being debated. The high-profile opinion-catalysing group GetUp is encouraging 
By Stephen Grenville
14 Mar 18
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Trump’s tariff antics as the TPP-11 is signed

The symbolism of last Thursday for the future of the global trading system was hard to miss. In Washington, Donald Trump authorised new tariffs on steel and aluminium imports of 25% and 10% respectively in one of the clearest signs yet that he plans on following through on his protectionist agenda.
By Roland Rajah
13 Mar 18
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No urgency in cutting Australian corporate tax

Prime Minister Malcolm Turnbull returned from Washington last month even more convinced of the need for deep cuts in Australia’s 30% corporate tax rate, which is well above that in the US. Given the numbers in the Australian Senate, however, it is unlikely the proposed tax cut will pass. How
By John Edwards
12 Mar 18
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Multilateral trade versus self-interest

How should countries respond to President Donald Trump’s tariffs on steel and aluminium? One response would be to retaliate. Another would be to emphasise the damage done to the global multilateral trade framework. Yet another would be to negotiate a side deal to avoid, and perhaps even benefit
By Stephen Grenville
07 Mar 18
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Trump’s tariffs: not a trade war, yet

Although widely portrayed as the opening shots in a trade war between the US and China, new US tariffs on steel and aluminium imports confirmed by President Donald Trump on Thursday clearly are not. China’s steel exports to the US account for barely more than 2% of total US steel imports, and
By John Edwards
02 Mar 18
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Central banks changing of the guard

Breaking tradition, President Donald Trump has not reappointed Janet Yellen to another term as chair of the US Federal Reserve. Elsewhere, central bank leadership is also in transition. What does this mean for central bank independence? In America, where political appointments of senior
By Stephen Grenville
16 Feb 18
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China’s economic gloom merchants

Markedly slower growth and imminent financial crisis have been the common dual predictions for China over the past decade. China’s growth has indeed slowed from its unsustainable breakneck pace in the two decades before the 2007–08 global crisis, but since then has settled down to a steady 6–7
By Stephen Grenville
02 Feb 18
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Don’t renegotiate the Trans-Pacific Partnership

Australia was quick to welcome US President Donald Trump's casual comment that the US might be prepared to join the Trans-Pacific Partnership if a "substantially better" deal could be struck. Yet while making it clear that we would welcome US participation on the terms already negotiated,
By Stephen Grenville
29 Jan 18
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What a US–China trade war would look like

Sometime soon, US President Donald Trump will announce his plan to respond to what the administration calls China’s “economic aggression”. When he does, it is not only China that needs to be prepared to respond. Together accounting for well over a third of global output, the collateral damage
By John Edwards
24 Jan 18
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Behind the Australia–Canada ‘wine war’

Australia has formally lodged a complaint against restrictions some Canadian provinces have placed on the sale of imported wine in grocery stores, in what has been described, somewhat dramatically, as a 'wine war'. Australia's action was described in the Ottawa Sun under the headline&
By Mike Callaghan
19 Jan 18
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Rethinking macro-economics: Fiscal policy

My recent post on rethinking macro-economics argued that monetary policy did all it could (and maybe was overstretched) during the weak recovery from the 2007-2008 crisis. The blame for the failure to achieve a robust recovery lies elsewhere, mainly with fiscal policy. The background for this
By Stephen Grenville
12 Dec 17
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The Bitcoin bubble

With Bitcoin trading at more than US$10,000 and suggestions it is not just a technological breakthrough, but also an exemplar of how to get around the failings of the nation state, it's time to try to sort out the various claims. Is it the next Amazon or tomorrow's Ford Edsel – a dismal flop? Is
By Stephen Grenville
04 Dec 17
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Converging approaches on Chinese investment

This article is part of a series for the Australia-UK Asia Dialogue, co-hosted by the Lowy Institute and Ditchley Foundation, and supported by the Department of Foreign Affairs and Trade and the Foreign and Commonwealth Office. Although both have been very open to foreign investment, Australia and
By John Edwards
01 Dec 17
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Rethinking macro-economics: Monetary policy

For the countries affected by the 2007-08 financial crisis, the recovery has been lacklustre. There was no self-equilibrating 'V'-shaped return to the pre-crisis GDP growth trajectory (see the familiar graph below, or here). Nearly a decade on, the recovery may be more assured, but the performance
By Stephen Grenville
09 Nov 17
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The first global supply chain

The city of Ternate in eastern Indonesia seems forgotten by time. Its quiet bustle is confined to the coastal fringes of Mount Gamalama, with its imperious presence. The most prominent building in the low-slung city is a monumental new mosque, minus two of its four minarets that fell down in a
By Stephen Grenville
03 Nov 17
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Central banks and the inflation conundrum

Inflation in the UK hit 3% for the year to September, but elsewhere it remains quite low, despite a strengthening global economy. Consumer price inflation in the US, for example, is sitting around 1.7%, yet output growth in the year to September was the strongest since 2015 and the unemployment
By John Edwards
02 Nov 17
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The future role of international financial institutions

The role of the multilateral development banks (MDBs) and other international financial institutions (IFIs) is back in the policy spotlight. The latest attention comes via the G20 Eminent Persons Group (EPG) on Global Financial Governance, formed by G20 Finance Ministers at their meeting
By Mike Callaghan
25 Oct 17
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Global growth: Choppy forecasts, but smooth sailing

It's been tough for those writing the IMF's World Economic Outlook in recent years. 'Is the Tide Rising?', the report asked in 2014, only to conclude later that same year that 'Legacies, Clouds and Uncertainties' still surrounded the global outlook. The next year there were 'Cross Currents', and
By John Edwards
04 Oct 17
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Politics slows Saudi reform plans

Even to the Saudi leaders looking at the consultants' PowerPoint presentation last year, Saudia Arabia's 2020 'National Transformation Plan' must have looked improbable. Unemployment to be cut by a fifth in just three years, 1.2 million additional jobs in five years, half of the Saudi workforce
By John Edwards
28 Sep 17
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‘Choosing Openness’ grapples with the big questions

In Choosing Openness, Andrew Leigh makes an important and timely intervention in the Australian debate about globalisation, free trade and immigration. This is, of course, a debate raging around the world, one that has seen Britain exit the EU, Donald Trump elected US President, Marine Le Pen
By Richard Holden
28 Sep 17
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Using economic diplomacy to reduce financial risks in Asia

If Australia’s economic future lies in Asia, then managing the risk of financial crises in the region should be a top concern. Especially as any crisis could also have significant geopolitical consequences. In an analysis for the Lowy Institute, Barry Sterland looks at what Australia can do
By Roland Rajah
18 Sep 17
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