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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.  

Jim Wolfensohn’s knowledge bank

Jim Wolfensohn, an Australian-turned-American who became president of the World Bank in 1995, was a mercurial character. His struggle to tackle the challenges of global development, relying on the weak reed of the World Bank, is a classic story of the heroic individual challenging global forces.&

What RCEP can tell us about geopolitics in Asia

Much of the economic gains from the newly signed mega trade deal known as the Regional Comprehensive Economic Partnership will come from mitigating what is called the Asian “noodle bowl effect”. The deal will harmonise what have to date been separate rules of origin across the region into

Prospects for a G20 “pandemic treaty”

Summit season has flashed before our eyes in 2020. The Covid-19 pandemic means we have largely been spared of the “theatre of summitry”, with less headline-grabbing drama than in previous years. For the G20, this was an opportunity to once again become a functional forum focused on developing

India heads towards economic autarky

India’s Foreign Minister Subrahmanyam Jaishankar this week made the clearest statement yet that India intends to head back down the road of economic autarky – for strategic reasons. This would represent a U-turn on almost 30 years of trade liberalisation, with profound effects for India’s role

RCEP revives the art of the deal

News that 15 governments had signed the text of the Regional Comprehensive Economic Partnership (RCEP) agreement did not force either Covid-19 or the presidential transition in Washington off the front pages. It probably attracted the attention it did because it was a virtual signing ceremony – a

The G20’s existential crisis

2020 could be defined as a year of global crises – health, political, environmental and economic. The G20 is caught among all four, and how the forum responds raises questions about whether it is facing its own existential crisis. With a chaotic US election and presidential transition as well as

China’s problematic lending comes home to roost

On 13 November, the finance ministers and central bankers of the G20 will hold an extraordinary meeting to discuss action to help poor countries struggling to pay debts. A key issue will be getting China, the world’s largest bilateral creditor, to play a more active role. The push by China’s&

Economic diplomacy: A headless WTO, selling the Asian farm

New world order The leadership of the World Trade Organisation may be the first test of whether the world can move on with normal life amid the divisions and recriminations as the US recovers from a bitter election. In one of its last international policy moves, the Trump administration last week

Economic diplomacy: Japanese investment takes a Toll

Will the bell Toll? The quiet flood of Japanese investment into Australia over the past few years amid at times mounting alarm about much lower levels of Chinese investment has been regularly noted here. But the astounding story of corruption and mismanagement inside the largest single Japanese

The International Monetary Fund and capital flows

Disruptive international capital flows were a central issue when the International Monetary Fund was created at the end of the Second World War. Capital-flow doctrine has radically shifted over time, attempting to reconcile conflicting objectives and opinions. The IMF Independent Evaluation Office

The many trails of Ant Group

When the last of the big four state-owned Chinese banks listed a decade ago, one could be forgiven for thinking that the age of mega Chinese financial listings was over. After all, with financial services being such a strategic sector for the Chinese Communist Party, who would have thought that the

Economic diplomacy: Federal budget hits and misses

Hide and seek It says a lot about the extent of the pandemic cash splash and the domestic politics of the federal budget that an unexpected rise in development aid spending didn’t even make the Treasurer’s speech. Aid spending will rise about 4% this year, confounding expectations that this

Global trade policy at a lull, but for how long?

Like a sailing ship caught in the doldrums, the international trade policy world seems stagnant and listless. Is there any fresh wind to be detected? Can we create some movement? In this coronavirus–dominated environment, nothing much is happening. The trend in global trade itself is not easy to

Economic diplomacy: A snapshot of overseas investment trends

Going outOne of the big questions facing Australian companies in the new world of reshoring and diversification is how to get the balance right in a time of disruption and power shifts. The federal government and two recent independent reports have told business to invest more in Asia, against the

Covid-19 and Indonesian monetary policy

Even before the Covid-19 pandemic, it had become routine for central banks in rich countries to help fund budget deficits by buying government bonds. “Quantitative easing” (QE) has been common since the 2008 global financial crisis, keeping interest rates down. With Covid, some central banks

Economic diplomacy: Borders, barriers and obstacles

Homeward bound While Australia’s embrace of economic sovereignty has so far involved more rhetoric than real financial resources, cash incentives for reshoring manufacturing are gathering pace in other countries. Last week’s €100 billion (A$162 billion) economic stimulus program from French

Debunking the myth of China’s “debt-trap diplomacy”

Against the fear and distrust that increasingly characterise Australia’s relationship with China, the Belt and Road Initiative looms large. Australian politicians from both major parties rarely agree on much openly, but nearly all agree that China uses the BRI to achieve geopolitical goals. Many

China sours on Australia’s wine

On Monday this week, the Chinese Ministry of Commerce announced it has commenced an investigation into whether Australia has been subsidising winemakers. This follows a parallel investigation launched two weeks ago to examine allegations that Australian winemakers have also been “dumping” their

Economic diplomacy: Spilled milk and foreign wages

Taking one for the team Spare a thought for Japanese company Kirin, which entered Australia in the vanguard of new ambitions for Asian economic engagement but is now a victim of an undeclared trade war with China. Treasurer Josh Frydenberg’s move to prevent Kirin selling its unsuccessful Lion

A post-pandemic trade revival

Albert Einstein once said that “in the midst of every crisis lies great opportunity”. For an open trading nation like Australia, the pandemic is an unparalleled crisis. The nation is facing its worst downturn since the Great Depression, along with recessions in key trading partners, severe

Australia doesn’t need to choose between guns and butter

The Morrison government’s plan for defence spending outlined in the Defence Strategic Update last month has been incorporated into the Canberra consensus, with Labor offering no criticism and the mainstream press largely supportive. Yet as the government grapples with debt and deficit as the

World order in the time of coronavirus

The liberal order faces its greatest crisis since the end of the Cold War. Liberalism is in retreat around the world. The United States is led by a president whose America-first realpolitik contradicts the very idea of rules-based governance. Europe has seen the rise of “illiberal democracies”.

Economic diplomacy: A call to syringes, not arms

Going out or staying in With Australia experiencing its first recession in a generation, potential differences are emerging over whether future prosperity will come from more business integration with high-growth Asia or from preserving capital for economic sovereignty at home. These, of course,

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