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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.  

Are free trade deals expanding a digital divide?

E-bills, e-signature, the electronic transfer of funds – advancements in technology are bringing about remarkable changes in the business landscape, domestically and internationally. All this change is facilitating the faster movement of goods across borders and forcing governments to keep pace.

India’s RCEP reticence

Despite the modern proliferation of free trade agreements, there is an enormous gap between free trade as it is understood and advocated by those who benefit from it, and free trade as it is practiced today. The understanding of economic integration is diverse and complicated – at its heart sits a

What’s so strategic about baby-food?

The discussion about China’s bid for baby-formula supplier Bellamy’s Organic shows the usual confusion about just what should guide decisions on foreign investment in Australia. Of course there will be some proposals that are defence-strategic. But baby formula is not one of them. Nor is

A light amid the gloom of the US-China trade war

Despite an optimistic bounce in global financial markets Friday, the relentless trade war between the US and China resumed Sunday. Threatened 15% tariffs by the US on another $250 billion of China imports went into effect Sunday morning, as did new China tariffs on US crude oil, soybeans and

China’s “currency manipulation” in context

Commentators are unanimous in noting the illogical nature of the US Treasury’s recent designation of China as a “currency manipulator”. It fits only one of the Treasury’s own criteria, and that one – a bilateral surplus with the US ­– makes no economic sense, either in fact or in theory

China-US currency clash: Who’s manipulating who?

The United States has labelled China a currency manipulator. The move sent shock waves through markets early this week and left many speculating what may come next. Trump has repeatedly called for lower interest rates and a cheaper currency to help him win his trade war with China (and the next US

Balancing act: China’s nationalist consumer boycotts

In June, a controversial statement from a UBS economist set off a firestorm in mainland China, causing serious trouble for the Swiss banking behemoth in one of its most important markets. Nationalist anger circulated on Chinese social media. The company apologised for the remarks and placed the

Trump and Xi need a trade deal and they need it soon

With resumed contact between US trade negotiator Robert Lighthizer and China’s negotiator Vice Premier Liu He, the 12th round of trade talks between the US and China may take place in Beijing before the end of July. But the clock is now ticking very loudly. Contrary to the messaging from Beijing

The race to be next IMF chief

The race is on to see who will take over as Managing Director of the International Monetary Fund (IMF) following the nomination of the incumbent, Christine Lagarde, as President of the European Central Bank (ECB). Will the informal gentleman’s agreement between Europe and America that has

What a waste: the G20 and the plastic problem

The recent G20 energy and environment ministers meeting in Osaka delivered an “implementation framework” for reducing the rapidly increasing levels of plastic waste choking the world’s seas and oceans. This year’s framework declaration echoes concern already expressed at the 2017 G20 meeting

The limits to global monetary policy

With forecasts of a slower global economy, central banks around the world are contemplating easier monetary policy. The problem is that monetary policy is already in “easy” mode and has been that way for a decade. This presents serious constraints on just how much more monetary policy can do.

Osaka G20: finding the right beat for hard conversation

A rap-style music video to promote the Osaka G20 leaders’ summit to be held on 28–29 June contains the lyrics “Let’s talk! Let’s dance! Here is Osaka wonderful city! Let’s conversation! Hard communication! Come on!”. The promotional video was produced by an Osaka-based group made up

Are we ready for a rare earths trade war?

Rare earth minerals have emerged as the latest front in the escalating US-China trade war. Nearly a decade after the Chinese government controversially suspended rare earth exports to Japan during the 2010 Senkaku dispute, similar threats are now being made if the bilateral trade dispute with the US

Oman: credibility gulf will test White House

For the US to directly accuse Iran of attacking oil tankers just outside the heavily congested, economically critical and strategically vital waters of the Persian Gulf … well, it ought to be a big deal. A really big deal. And it’s not as if this story is being ignored. As I checked this

America’s fiscal policy rethink reaches Japan

Among some prominent policy wonks in America, a profound rethink of fiscal policy has been underway for the last couple of years, making the case for more-expansionary – or at least less-contractionary – fiscal policy. Japan, already with a mountain of government debt and substantial budget

Huawei and the decoupling dilemma

In two dramatic policy announcements this month, the Trump administration effectively barred US companies and government agencies from buying telecommunications equipment or services from – or selling any components to –Chinese technology champion, Huawei. President Donald Trump signed a broadly

Trump’s tariff tussle

As predictable as Big Ben striking the hour, as subtle as a battering ram, the final stages of the US-China trade negotiations involve upping the ante with a further tariff increase, as seen last week. Tariffs are the negotiating instrument, not the objective. For financial journalists needing an

Economic diplomacy: ASEAN trade, BRI deals and ageing Asia

When the Australian Chamber of Commerce and Industry surveyed its members last year about their use of trade agreements, the ASEAN-Australia New Zealand Free Trade Agreement surprisingly emerged as the third best known and used of 14 available trade concession frameworks. So, it is appropriate

The useful myth of central bank independence

One of the sustaining myths of modern economics is that central banks are independent, able to pursue monetary policy free from the pressures of politics. This makes monetary policy more effective: it gives confidence that the economy will be kept on a steady path unaffected by the exigencies of the

Book Review: Utopia For Realists

Book Review: Utopia For Realists, And How We Can Get There, by Rutger Bregman (Bloomsbury, 2017) Rutger Bregman shot to public fame calling out billionaires at this year’s World Economic Forum meeting in Davos. “1500 private jets flying in here to hear Sir David Attenborough speak about

Economic diplomacy: trade and infrastructure battles in Asia

Each way bet Australian businesses are simultaneously becoming more dependent on China and traditional Anglo markets just when the country’s foreign policy thrust is to diversify links to major emerging nations such as India and Indonesia. This at a time a new survey of business attitudes to

The sudden interest in Modern Monetary Theory

The decade since the financial crisis of 2008 has been unkind to conventional economics. The gap between the observed facts and mainstream theory opened an opportunity for alternative theories to take hold. Among them, Modern Monetary Theory (MMT) fits the American zeitgeist: “big-ticket”

What might a US-China trade deal look like?

Perhaps they will, perhaps they won’t, but if China and the US do reach a trade agreement in coming weeks it will likely be very long. Meeting to seal the deal, President Donald Trump and China’s leader Xi Jinping will be able to display to the cameras a document of at least a hundred pages

An orthodox economic take on climate change shocks

In a debate as politically fractious as climate change, it is useful to have credible voices joining the fray. On Tuesday night, the Reserve Bank of Australia (RBA) waded into the waters with a speech by Deputy Governor Guy Debelle. It has immediately been seen as an urgent call to action. More

Book Review: A Partnership Transformed

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Economic diplomacy: Development aid in the Belt & Road era

Mergerplomacy Five years after the Department of Foreign Affairs and Trade (DFAT) swallowed AusAID in the first major spending cuts of the new Coalition Government, two contradictory trends seem to be emerging. The reality of the takeover is getting some grudging acceptance in the

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