Wednesday 26 Apr 2017 | 09:37 | SYDNEY
What's happening on

Global Economy

Overview

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.

What the Lowy Institute does

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.

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.  

China’s financial concerns

The China bears have been around for years, continuously predicting the end of China's stellar growth story. In 2012 Michael Pettis expected annual growth to average 3% over this decade and in 2015 Tyler Cowen warned of an imminent disastrous financial collapse. So far, so good. China's

Lessons from India on migration’s role in trade policy

Prime Minister Turnbull yesterday carefully signalled a potential India-Australia Free Trade Agreement is not a priority for his government. This comes after the Abbott Government set a very public benchmark for concluding an India-Australia FTA by the end of 2015, an overly optimistic commitment

China's huge industrial ambitions

The RAND Corporation has just published a new report on Chinese investment in the US aviation sector. Given the air of concern in Australia and sometimes the US over Chinese investment in strategic industries (remember when China's CNOOC tried to buy US oil giant UNOCAL?), the tone of the report is

Are US Fed rate projections ‘behind the curve’?

Last Wednesday the US Federal Reserve raised the Fed funds rate for the third time since the 2008 financial crisis. Financial market commentators have worked hard over this eight-year period to create downside drama in the narrative of the return of interest rates from the abnormally low levels of

Global lessons from South Australia's power dilemma

South Australia (SA) has become a global case study for what can go wrong when energy policy fails to keep pace with changes in technology and commodity markets. Following the closure of the Northern coal-fired power plant in May 2016, SA has experienced a set of blackouts. The most significant

Pages