Tuesday 19 Jun 2018 | 07:07 | 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.  

G7: the most honest summit – ever!

US President Donald Trump’s performance last week at the G7 summit at La Malbaie, Canada, may have thrown the G7 into disarray and left US–Canada relations in tatters, but he may have done the world of international summitry a service when he withdrew US endorsement of the summit

Tariffs: the US rebuffed

The terse statement from the G7 finance ministers meeting about the US decision to impose steel and aluminium tariffs on the EU, Canada, and Mexico has shocked many observers used to such summits ending with droll communiques filled with platitudes about global collaboration and cooperation.

When is monetary policy neutral?

Interest rates are on the way up in America, with financial markets in “risk-off” mode, nervously wondering just how much rates will rise. John Williams, recently appointed to head the New York Federal Reserve Bank (giving him a key role in the rate-setting Federal Open Market Committee in

China’s looming financial crisis

Governor of the Reserve Bank of Australia Philip Lowe’s speech last week highlighting the risks to the Chinese financial system from shadow banks – non-bank financial institutions often operating in more lightly regulated wholesale markets – has once again drawn attention to the

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.

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 

The high price of fashion

The 1990s saw the birth of an anti-sweatshop movement demanding that multinational corporations improve working and environmental conditions along every step of the global value chain. By the end of the decade, then UN secretary general Kofi Annan used his address to the World Economic

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.

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

Is Trump ready to bear the cost of a trade war?

Agree or disagree with his conclusions, we owe Hugh White thanks for forcing us to grapple with “the China challenge”. White’s writings have stripped away much of the easy, high-sounding rhetoric about dealing with Beijing and honed in on the central feature of US–China relations in the

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

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

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

Australia, Asia, and the “Wealth of Nations”

How does Australia’s economy align with those of our Asian neighbours? What are the development challenges facing nearby South East Asian countries? And just how large is China’s economy? These questions are of particular interest this week as the ASEAN-Australia Special Summit is held in Sydney

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 

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.

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

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

Company tax cuts: America versus Australia

The expert panel on the ABC’s Q&A program earlier this month was hopelessly confused in comparing Donald Trump’s cut in US company tax with the proposed company tax cuts in Australia. Although it’s often useful to compare domestic economic policy initiatives with those

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

China’s cobalt conundrum in Congo

More than half of the cobalt that goes into phone batteries and electric vehicles worldwide – 66,000 of 123,000 tons produced in 2016 – is sourced from the Democratic Republic of Congo (DRC). Global demand is expanding rapidly. But lawmakers in Kinshasa have decided to cash in, targeting Western

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

Sea cables in a thawing Arctic

China has made a significant foray into the Arctic with the creation of a data “silk road”. Strongly supported by a newfound closeness with Russia, preliminary planning of a Chinese and Finnish–led trans-Arctic cable along the Arctic’s Northeast Passage in partnership with Japan and Norway

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,

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

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&

Xi saves sea slugs on the sea floor

This post is based on Episode 16 of The Little Red Podcast, featuring Kate Barclay and Michael Fabinyi of the University of Technology, Sydney. My first culinary meeting with a sea cucumber - bêche-de-mer or BDM in its processed form - came out of curiosity. After nearly two decades travelling

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