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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.  

Where to for trade policy?

With the signing of an interim “free trade” deal with India, and an agreement with the European Union nearing the final stages, Australia has moved closer to the previous government’s target of 90 per cent of trade being covered by bilateral and plurilateral trade agreements. This does not

A flash in the pan? Indonesia’s palm oil export ban

The global vegetable oils industry was stunned after Indonesia’s President Joko Widodo announced late last month that his country, the world’s largest producer of palm oil, would impose a ban on exports. While Jokowi, as the president is widely known, cited domestic shortages in cooking oil as

Economic diplomacy: Trade shifts challenge a new government

Make or break Trade matters haven’t made much of an impact in Australia’s election campaign, not surprisingly overshadowed by Solomon Islands in the foreign affairs debate and now interest rate rises in the domestic debate. The Labor Opposition stepped up the rhetoric at its campaign launch

Economic diplomacy: After Ukraine, the IMF ponders the future

Diminishing consensus That grandee of American economic statecraft Robert Zoellick made an uncomfortable return to public life this month by being lampooned for sitting on the Twitter board for four years but never managing to tweet. Nevertheless, the one-time Republican consiglieri has provided

A first for India and a chance to trade up with Australia

The Australia-India Economic Cooperation and Trade Agreement (AIECTA) signed on 2 April marks a first for India in terms of liberalisation of “substantially all” trade and timeline of negotiations. India has often been blamed for prolonging trade negotiations with its rigid stance on tariff

Trade policy agenda facing new drivers

There can be little doubt that the conduct of Australian trade policy will become more complex and challenging for the foreseeable future. Two trends are salient. First, with the deterioration in global geopolitical circumstances, trade policy and foreign and strategic policy have increasingly

The Ukraine crisis and Timor-Leste

In the midst of an international crisis, it is remarkable when small countries still find the courage to adhere to their democratic principles. This time the Timorese government has chosen to respect its independence history and democratic values by condemning the Russian invasion of Ukraine. This

Sanctions bite – but how dangerously?

Though not without precedent against lesser rivals, the decision to impose severe financial sanctions against a major economy – and a nuclear-armed great power – has been a dramatic step. Not only are Russian elites, and Vladimir Putin himself, being economically targeted following the

Will cryptocurrency allow Russia to bust sanctions?

It wasn’t that long ago that sanctions busting was a relatively straightforward, if risky, gig. As Australian wheat exporter AWB showed when Saddam Hussein’s Iraq was under sanction in the late 1990s and early 2000s, it was a case of lining up a few officials, throwing in some kickbacks and

US monetary policy: the ripple effect

Book Review: The Lords of Easy Money: How the Federal Reserve Broke the American Economy, by Christopher Leonard (Simon & Schuster, 2022) A book focused on the failures of American monetary policy in the post-GFC period would have a tiny readership, confined to academics and

China’s “common prosperity” is a Catch-22

The events of the latter half of 2021 show that Beijing is willing to tolerate significant economic pain to deleverage its property sector. For the Chinese Communist Party, the financial and social risks posed by the current state of the real estate sector are existential. At the end of the second

Bitcoin vs the IMF, and other great expectations

Digital divide El Salvador ranks only 89th on the latest index of cryptocurrency adoption around the world, but it may be at the frontline of one of the fascinating global financial questions this year. Will it be nervous investors or nervous financial regulators that play the key role in

Australia should build its green infrastructure presence

A group of former diplomats are among the many parties making a persuasive case for Australia to adopt a more climate-conscious foreign policy. One particularly beneficial endeavour in this respect would be to fully embrace the increasingly popular and strategically potent financing of regional

Whoever controls the spice, controls the universe

In the science-fiction classic Dune, the natural resource of “spice” represents the most valuable commodity in the universe, found only on the desert planet of Arrakis. Spice serves various purposes in Dune, but in both movie adaptations of the novel, Baron Harkonnen, former ruler of Arrakis,

History lessons from “The Great Crash”?

In J.K. Galbraith’s entertaining 1954 account of the stock-market collapse of 1929 The Great Crash (re-released by Penguin in paperback last year), the celebrated economist took delight in recording the madness of crowds, responding to the lure of easy wealth. Galbraith observed that, unlike

Kip-to-currency?

A rare spate of headlines out of Laos last month trilled about a new bullet train that runs from the capital Vientiane to China, with the government heavily in debt after the exercise. But the country was also recently included in a less than auspicious list. The International Monetary Fund ranked

Pakistan and China: An unhappy union in Gwadar

A couple of months back, 70-year-old housewife Masi Zainab asked a charismatic local political leader, Maulana Hidayat-ur-Rehman Baloch, to help mount a protest for the rights of the citizens of Gwadar, a port city in southwestern Pakistan. Within weeks, Masi Zainab was marching with thousands of

Common prosperity meets the Belt and Road

China’s President Xi Jinping’s concept of “common prosperity” is slowly being internationalised. The most obvious manifestation of this came last month when Xi framed the Belt and Road (BRI) as a vehicle for achieving global common prosperity. While it is far from clear at this stage how

Twenty years of BRICS

It is 20 years since Goldman Sachs chief economist Jim O’Neill invented the BRIC economic grouping – Brazil, Russia, India and China – with South Africa added later to make up the BRICS. He celebrated this anniversary with a self-congratulatory article in the Financial Times, expressing his

Economic diplomacy: Free trade vs economic resilience

Santa clauses The value of global goods trade during the biggest pandemic in a century last year dropped about a third less than it did during the biggest financial crisis in a generation in 2008. But internet searches about “economic resilience” are running more than twice as high these days

Time to step up on global kleptocracy

When the Pandora Papers were published last month, few registered their significance for Australian statecraft. Spanning 11.9 million leaked documents, and exposing the property empires and shell companies of kings, presidents and celebrities, the revelations generated scandals and condemnation. But

China’s digital currency: Next stop, Africa?

In April 2020, China was the first major economy to pilot a digital currency, the e-yuan or e-CNY. The e-CNY, which will eventually replace physical cash and is currently being tested in Chinese cities, is integrated with the Digital Currency Electronic Payment (DCEP) system and data processing

Framing globalisation

  Six Faces of Globalization: Who Wins, Who Loses, and Why it Matters, by Anthea Roberts and Nicolas Lamp (Harvard University Press, 2021) People use mental shortcuts to organise their thinking about complex issues, but because the same situation can be presented in different ways,

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