Wednesday 21 Oct 2020 | 07:22 | SYDNEY
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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.  

The many trails of Ant Group

When the last of the big four state-owned Chinese banks listed a decade ago, one could be forgiven for thinking that the age of mega Chinese financial listings was over. After all, with financial services being such a strategic sector for the Chinese Communist Party, who would have thought that the

Economic diplomacy: Federal budget hits and misses

Hide and seek It says a lot about the extent of the pandemic cash splash and the domestic politics of the federal budget that an unexpected rise in development aid spending didn’t even make the Treasurer’s speech. Aid spending will rise about 4% this year, confounding expectations that this

Global trade policy at a lull, but for how long?

Like a sailing ship caught in the doldrums, the international trade policy world seems stagnant and listless. Is there any fresh wind to be detected? Can we create some movement? In this coronavirus–dominated environment, nothing much is happening. The trend in global trade itself is not easy to

Economic diplomacy: A snapshot of overseas investment trends

Going outOne of the big questions facing Australian companies in the new world of reshoring and diversification is how to get the balance right in a time of disruption and power shifts. The federal government and two recent independent reports have told business to invest more in Asia, against the

Covid-19 and Indonesian monetary policy

Even before the Covid-19 pandemic, it had become routine for central banks in rich countries to help fund budget deficits by buying government bonds. “Quantitative easing” (QE) has been common since the 2008 global financial crisis, keeping interest rates down. With Covid, some central banks

Economic diplomacy: Borders, barriers and obstacles

Homeward bound While Australia’s embrace of economic sovereignty has so far involved more rhetoric than real financial resources, cash incentives for reshoring manufacturing are gathering pace in other countries. Last week’s €100 billion (A$162 billion) economic stimulus program from French

Debunking the myth of China’s “debt-trap diplomacy”

Against the fear and distrust that increasingly characterise Australia’s relationship with China, the Belt and Road Initiative looms large. Australian politicians from both major parties rarely agree on much openly, but nearly all agree that China uses the BRI to achieve geopolitical goals. Many

China sours on Australia’s wine

On Monday this week, the Chinese Ministry of Commerce announced it has commenced an investigation into whether Australia has been subsidising winemakers. This follows a parallel investigation launched two weeks ago to examine allegations that Australian winemakers have also been “dumping” their

Economic diplomacy: Spilled milk and foreign wages

Taking one for the team Spare a thought for Japanese company Kirin, which entered Australia in the vanguard of new ambitions for Asian economic engagement but is now a victim of an undeclared trade war with China. Treasurer Josh Frydenberg’s move to prevent Kirin selling its unsuccessful Lion

A post-pandemic trade revival

Albert Einstein once said that “in the midst of every crisis lies great opportunity”. For an open trading nation like Australia, the pandemic is an unparalleled crisis. The nation is facing its worst downturn since the Great Depression, along with recessions in key trading partners, severe

Australia doesn’t need to choose between guns and butter

The Morrison government’s plan for defence spending outlined in the Defence Strategic Update last month has been incorporated into the Canberra consensus, with Labor offering no criticism and the mainstream press largely supportive. Yet as the government grapples with debt and deficit as the

World order in the time of coronavirus

The liberal order faces its greatest crisis since the end of the Cold War. Liberalism is in retreat around the world. The United States is led by a president whose America-first realpolitik contradicts the very idea of rules-based governance. Europe has seen the rise of “illiberal democracies”.

Economic diplomacy: A call to syringes, not arms

Going out or staying in With Australia experiencing its first recession in a generation, potential differences are emerging over whether future prosperity will come from more business integration with high-growth Asia or from preserving capital for economic sovereignty at home. These, of course,

The way to post-Covid recovery in the Indo-Pacific? Act now

Australia plans to spend a lot more on defence to confront what Prime Minister Scott Morrison says will be “a post-COVID world that is poorer, that is more dangerous, and that is more disorderly”. A chorus of voices have responded that Australian foreign policy risks becoming unbalanced, with

The world can still prosper from free trade

Did anyone notice that the United States–Mexico–Canada Agreement (USMCA), the revised NAFTA, entered into force on 1 July? If not, do not be too concerned, as the Covid-19 crisis has probably affected that as well. Still, this deal is (without getting too much into the weeds of whether it is

Social credit: The next China risk for Australian business

As China recovers from the Covid-19 crisis, the apparatus of the state is about to be devoted to a new form of social control. By the end of 2020, China plans to introduce its national social credit system. For some, this evokes dystopian visions of a surveillance state, monitoring more than a

Economic diplomacy: Covid recovery, from Singapore to the EU

Labour pains High-end guest workers play such a big role in Singapore’s carefully constructed economy that they even have their own technocratic acronym: foreign PMETs – for professionals, managers, executives and technicians. But in one of the many deglobalisation cracks wrought by Covid-19

Costly cargo: The plight of seafarers in a pandemic

Amid the many consequences of the coronavirus pandemic, thousands of seafarers around the world are now locked onboard their ships with expired contracts and unable to get home. In a normal month, approximately 100,000 seafarers leave their ships and are replaced by others, but travel

The economics of national security in Hong Kong

In the late hours of Tuesday evening last week, China’s new national security law for Hong Kong came into force. Seen by many as a response to the pro-democracy protests that erupted in the city last year, the law criminalises four types of national security offenses: sedition, subversion,

Indonesia: Still caught between trade and protectionism

The entry into force of an ambitious Indonesia-Australia trade deal on Sunday is a boost to the bilateral relationship, coming after nearly a decade of difficult negotiations. No two neighbouring G20 economies trade as little as Australia and Indonesia, and the investment relationship is similarly

Economic diplomacy: Diversification dilemmas

Costing the D word Diversification might be the word of the moment in the lexicon of Australian trade debate, even though few advocates make much attempt to explain how it will actually work. But now we have two interesting efforts to quantify just how selected reductions in trade with China in

Book Review: What’s holding China’s economy back?

Book Review: Dexter Roberts The Myth of Chinese Capitalism: The Worker, the Factory, and the Future of the World (St Martin’s Press, 2020) With the US, Brazil and many European countries struggling to manage the Covid-19 pandemic, China seems to be emerging as an even greater economic and

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