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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.  

A Chinese canal in Nicaragua?

There is pride in Hong Kong that a local private company is pushing ahead with perhaps the world's largest-ever civil works project, the 280km long, 500m wide Nicaragua Canal. Construction began in December 2014. The South China Morning Post dismisses outside suspicions while modestly describing

No, the IMF did not cause the Ebola crisis

Headlines blaming the IMF for the Ebola crisis are something you may expect in the tabloid press. However, a robust debate on the role of the IMF in the spread of Ebola was started by an article in The Lancet, a leading health journal. Four British professors claimed that the fiscal austerity

Is China fragile?

The Black Swan, by Nassim Nicholas Taleb, is a parable for unanticipated risk: the possibility of 'unknown unknown' events that no-one sees coming. In a new essay, The Calm Before the Storm, Taleb further posits that perceptions of risk are distorted by 'fragile stability.' Some countries (eg.

Cambodia's controversial dam seems set to go ahead

What is happening with Cambodia's Lower Se San 2 dam? Elliot Brennan's citation of a Bangkok Post report of Cambodian Prime Minister Hun Sen's speech at the opening of the Stung Russey Chrum Krom hydroelectric dam in Koh Kong province in Tuesday's Southeast Asia links is interesting for a number

Oil drops 50%, world shrugs

What does the fall in the price of oil do for global economic growth? If the price of oil had swiftly risen by 50%, economic commentators would be calling this an economic disaster. In fact the price has fallen by 50% since June last year, yet this ray of good news hasn't pierced through the

India's new Asia-Pacific strategy: 'Act East'

It has been a busy year for India in the Asia Pacific. From multilateral summits to bilateral diplomacy, the Modi Government has deliberately moved to step up engagement with its East and Southeast Asian partners. At this year's India-ASEAN Summit, Prime Minister Modi announced his intention to

Lima climate conference: Slow movement on Planet UNFCCC

As haggard negotiators left the UN climate change conference in Lima in the early hours of Sunday morning, many observers noted the contrast between the political acrimony that characterised the final days of these tortured discussions and the sense of optimism that many felt going into the talks

Why Peter Thiel is wrong about monopolies

A few weeks ago Sam Roggeveen quoted PayPal founder Peter Thiel, who argued that competition is over-rated and monopoly would enhance innovation. We shouldn't be surprised that business people are in favour of monopoly. In 1776 Adam Smith observed: People of the same trade seldom meet together,

G20 Brisbane Summit: Australia's adolescence on show

Australia had a prime chance to demonstrate its adult status in chairing the G20 Summit this year. What did it do with the opportunity? It showcased some of the characteristic behaviours of an adolescent country, my term for Australia in a new Lowy Institute Paper. Tantalisingly, it also showed

Sanctions and the coming Russian recession

The IMF, OECD and the Russians themselves have substantially downgraded their Russian economic growth forecasts for 2015. The fall in the oil price is partly responsible. However, heightened 'geopolitical risk' was also mentioned as a drag on activity, along with the effect of sanctions. But just

China's G20 year will raise human rights concerns

The G20 party may have ended in Brisbane, but the show rolls on. The leaders' forum will head to Turkey in 2015 and, in his final act as G20 chair for 2014, Australian Prime Minister Tony Abbott confirmed 2016 will see leaders heading to China. I've just co-written a paper on what the first ever

Financial stability: Did the G20 go far enough?

Financial stability was not the most headline-grabbing topic discussed at the Brisbane G20 meeting, but judging from the official communique word-count (a full 175-word paragraph in the three-page document, plus four substantial items in the annexes), a fair bit must have happened. Governor of

Beyond the Boom: A response to John Edwards

Senior economic policy makers, economic analysts, academics and commentators have been concerned about the daunting challenge of structural and budget adjustment facing Australia due to the decline in mineral prices from the levels reached in the boom period of 2003-04 to 2011-12. In Beyond the

Why economics doesn't explain China's FTA decision

Malcolm Cook and I have been debating why China has been willing to bless Tony Abbott with an FTA when Mr Abbott has so strongly opposed Beijing's political and strategic interests and aspirations in Asia. Why has President Xi met Mr Abbott's stick with such a juicy carrot, especially when

Fiji grabs the limelight as leaders of China and India visit

Jenny Hayward-Jones is Director of the Lowy Institute's Melanesia Program and Philippa Brant is a Research Associate at the Lowy Institute. Pacific Island leaders have had the rare opportunity to meet the international leader of the moment, Narendra Modi, and the president of the world's

China-Australia FTA: Let's calm down

Free trade agreements (FTAs) are back. After a lot of bureaucratic blood sweat and tears, Australia and China have signed a Declaration of Intent, and now both sides will prepare legal texts of the Agreement. This appears part of a broader pattern for China, which reportedly is becoming more

A G20 watcher in Brisbane

I am from Brisbane, and somewhat ironically, my original ticket out of this city was the G20 analysis I conducted while studying and working at the University of Queensland. In a serendipitous turn of events, Australia and my hometown city were announced as 2014 G20 hosts during that research, which

Weekend catch-up: A G20 special

With the Brisbane G20 Summit on this weekend, The Interpreter's usual weekend catch-up makes way for a 'best of' our G20 material from the past year. The Lowy Institute's G20 Studies Centre has been publishing on all aspects of the Summit, including what the presidency has meant for Australia, as

Beyond the Boom: A response to Jonathan Pincus

In a paper published recently on the Minerals Council of Australia website, Adelaide-based economist Jonathan Pincus takes issue with some of the calculations I make in my Lowy Institute Paper Beyond the Boom. He makes a number of criticisms, but the big one is of my estimate of the income gain from

Is the Global Infrastructure Hub more than a G20 legacy monument?

By Hugh Jorgensen, Research Associate and Tristram Sainsbury, Research Fellow, both at the Lowy Institute's G20 Studies Centre. Infrastructure has been a priority of the Australian G20 presidency, but we haven't seen much in terms of bricks and mortar proposals. Until now. Writing in The

China plans a global bullet-train dynasty

It is often observed in China that, the worse the economy, the more active the nation's railway building becomes. A flurry of new high speed rail (HSR) announcements, domestic and international, might suggest that policymakers are worried. Indicators like electricity, freight, steel and wholesale

Will the G20 address inequality at the Brisbane summit?

Of the 60-plus official meetings that have taken place under Australia's 2014 G20 presidency, a grand total of one has managed to produce a final communiqué or meeting report that mentions the word 'inequality'. To be fair, it does mention it twice: the 10-11 September declaration of G20 Labour and

Congress, midterms and the TPP

US mid-terms elections will take place on 4 November, with polls suggesting the Republicans will re-take control of the Senate. President Obama's next steps on the Trans Pacific Partnership (TPP), which his Administration says is the key economic plank of the rebalance to Asia, will be heavily

China's coal addiction

A recent paper in Nature says that 'no other country is investing so much money or generating so much renewable energy' as China. 'Its build-up of renewable energy systems at serious scale is driving cost reductions that will make them accessible to all.' The International Energy Agency reckons

Why Larry Summers might be wrong about China's growth

Forecasts of China's growth always attract interest, even when they are a year old. Larry Summers and Lant Prichett are getting another good run with the paper they published last year (see my earlier post), which analyses emerging-economy growth in general, but of China and India in particular

G20 Monitor: The G20’s growth agenda

This issue of the G20 Monitor provides a guide to the policies that G20 members will have to tackle to achieve the G20’s 2 per cent growth target, drawing on the recommendations of the IMF, OECD and a number of international think tanks

The WTO is in big trouble

The Director-General of the World Trade Organisation (WTO), Roberto Azevedo, says the institution has descended into 'paralysis'.  Director-General of the World Trade Organisation, Roberto Azevedo, Bali, 2013. Following the failure to get India to remove its objection to advancing the

Which countries are driving global growth?

Sometimes a picture is worth a thousand words. With the G20 focused on increasing economic growth, it's worth remembering where the global action is. The above graph from the IMF Multilateral Policy Issues Report, published in July, shows that the emerging economies have been doing the heavy

China wants a bigger piece of the smartphone business

The smartphone in your pocket embodies today's cutting-edge technology. It is also a product of a global supply chain decidedly old-school in the way it shares rewards. Two brands, Apple and Samsung, scoop over 100% of the profit pool (the other brands are losing money, giving them negative

Why the IMF's poor forecasting matters

Economic forecasting is the butt of jokes, but someone has to do it. You can't make sensible macro policy without some view of how the economy will travel. It's the IMF's thankless job to be the high-profile forecaster for the globe. The Fund's latest World Economic Outlook acknowledges its recent

IMF changes its tune on infrastructure

In its latest World Economic Outlook, the IMF has joined the chorus of international institutions (G20, OECD) calling for more infrastructure spending. What new elements does the Fund bring to this argument? Global growth has been disappointing. One reason is that governments have cut back on

Australian Customs: A bigger role to play in trade

In a new Lowy Institute Analysis launched today, Nicholas Humphries, the Australian Customs and Border Protection Service Fellow at the Lowy Institute, examines how Customs can increase Australia's trade competitiveness at a time when goods and services are increasingly produced across borders in

Indonesia's economy at a crossroads

With the passing of the presidential baton from Susilo Bambang Yudhoyono to Joko Widodo just a month away, Indonesia is at a political crossroad, with the first clear break from the politicians who were part of the Soeharto years. Monday's Indonesia mini-update at the Lowy Institute, a half-day

If Justin Lin is right, industrial carnage awaits

Justin Yifu Lin insists China can grow at 7-8% for another 20 years. A contrarian with a remarkable personal background, the former World Bank chief economist's views influence his country's top leaders and their sense of destiny. What he says matters. How, and how fast, China grows will be highly

The end of economic convergence? Not quite

Given that emerging economies continue to grow two or three times faster than advanced economies, the persistent gloom about their prospects is puzzling. The latest example comes from The Economist, which argues that convergence, the process by which poorer countries catch up to rich countries

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