In The Press   PAGE 4

Page 1 | Page 2 | Page 3 | Page 4 | View All

US grapples over financial reform package

April 24, 2010

The US Senate is currently debating a piece of legislation to impose new regulations on the US financial industry in an effort to prevent a financial crisis on the scale of 2007-2009 from occurring again. In particular, reforms being floated include provisions to end taxpayer funded bailouts of big banks or financial institutions that are facing difficulty, as well as further protection for consumers from predatory financial and lending practices. The US domestic debate is taking place within a broader global effort to introduce new regulations on the global financial sector – finance ministers and heads of central banks met at a recent G-20 meeting and also pledged to introduce new financial reforms.

Japan’s economy shows positive signs

April 23, 2010

Japanese exports increased by a significant 43.5 per cent compared to a year ago, helping to provide increased momentum for the country’s economic recovery. Exports grew for a fourth consecutive month in March, prompted mostly by large companies like Mitsubishi Electric Corp. Additionally, in a sign that domestic demand has picked up, Japan’s imports grew by 20.7 per cent last month. The International Monetary Fund (IMF) has predicted that Japan’s economy will grow by 1.9 per cent this year; significantly below the 8.8 per cent predicted for India and the 10 per cent for China. Most commentators believe that the recovery is likely to continue, given that rising demand in emerging markets will drive demand for Japanese exports: exports to Asia have already risen by 52.9 per cent. Specifically, exports to China have increased by 47.7 per cent and exports to the US have grown by 29.5 per cent.

Australia to resume ‘two-speed’ economic growth

April 23, 2010

Despite Australia’s resilient performance during the global recession, the Reserve Bank has warned that the gap between Australia’s booming mining sector and the remainder of its economy may widen. Resultantly, not everyone will experience the benefits of economic growth in the years to come. While rising commodity prices benefit Australia’s commodity exporters, it pushes up the value of the Australian dollar and therefore makes other exporters – mostly in regions away from the large mining centres of Western Australia and Queensland – less internationally competitive. For example, the number of mining jobs grew by 11.9 per cent in the three months to February while the number of jobs in the accommodation sector fell by 2.7 per cent. Different growth rates between regions also makes it difficult for the Reserve Bank to raise interest rates, as it may adversely affect industries that have not fully recovered from slower conditions.

Britain’s economy grows by 0.2 per cent in first quarter

April 22, 2010

Official figures indicate that Britain’s economy grew by 0.2 per cent in the first quarter, slightly lower than the 0.4 per cent expected by many economists and noticeably lower than the normal quarterly rate of 0.6 per cent. Nevertheless, the figures are consistent with the British Government’s budget forecast of 1 to 1.5 per cent economic growth for the year. The growth comes in spite of an increase in Britain’s national value-added tax to 17.5 per cent. Business services and manufacturing contributed the most to economic growth, driving private sector growth to a little over 0.2 per cent. Overall, the figures suggest that Britain has turned a corner in its path to economic recovery, and most economists expected that the growth rate will continue to rise as the year progresses.

Australia to lead global recovery according to IMF

April 21, 2010

A new report released by the International Monetary Fund (IMF) has claimed that Australia is one of only a few countries helping to lead the global economy out of the depths of severe recession. While pointing to the sluggish recovery being witnessed in other advanced, industrialised economies – such as the US and the UK – the report praises Australia’s economic performance and predicts 3 per cent economic growth for this year and 3.5 per cent for next year. In particular, strong demand for commodities from industrialising countries like China and India is expected to promote steady, sustainable growth, helping Australia’s unemployment rate to average 5.3 per cent this year before dropping to 5.1 per cent next year. Many additional reasons have been floated to explain Australia’s resilience during the worst global recession since the 1930s – in particular, Australia’s relatively low level of indebtedness and tougher regulation of its financial sector reduced its exposure to the global slowdown. Overall, the IMF is predicting that the global economy will grow by 4.2 per cent this year. China is expected to grow by 10 per cent; India by 8.8 per cent and the US by 3.1 per cent.

US economy adds 162,000 jobs

April 2, 2010

The US economy posted the largest job gain in over three years during March 2010, adding a significant 162,000 jobs to the US labour force. However, since more people are now entering the labour force in search of employment (an increase in the nation’s labour force participation rate), the unemployment rate itself remained steady at 9.7 per cent for the third month in a row. Nevertheless, the increase in jobs was slightly lower than expected – economists had earlier expected the creation of 190,000 jobs, rather than 162,000 jobs. Private employers added 123,000 jobs – significantly higher than the 8,000 added in February and the 16,000 added in January. However, in a sign that the financial sector remains fragile and weak, companies in the finance industry lost 21,000 jobs. Overall, however, the pace of economic recovery in the US has been slow and most economists do not believe there will be a significant decrease in the unemployment rate over the course of 2010. Presently, around 15 million Americans are still unemployed. During the course of the recession, around 8.4 million Americans lost their jobs. Those that remained hit historically high productivity rates in 2009. In the broader context, the US Federal Reserve has continued to leave interest rates at historically low rates of 0 – 0.25 per cent for an ‘extended period’ in order to promote spending and investment.

India’s industrial output increases by 16 per cent throughout February

April 1, 2010

India’s economy continued to perform strongly throughout February, with industrial output increasing by a significant 16 per cent. However, stronger economic conditions have increased the likelihood of an interest rate hike by the Reserve Bank of India in order to temper the prospect of inflationary pressures. Already, the RBI increased key lending and borrowing rates by 25 basis points earlier in the month and is expected to increase rates by a further 25 basis points in April. India’s inflation levels are presently sitting at around 10 per cent. Overall, the government expects India’s economy to grow by 7.2 per cent in 2009-10.

Australia’s trade deficit widens

April 1, 2010

Australia’s trade deficit worsened throughout February, driven by strong domestic demand for imports and slightly slower exports in the face of a still weak international environment. The balance on goods and services (BOGS) deficit thus widened to $1.92 billion in February, compared to earlier expectations of around $1.32 billion. Interestingly, the trade deficit has widened even after Australia has been able to negotiate significant price increases for its commodity exports, such as coil and iron ore. On the other hand, imports increased significantly as Australian miners purchased equipment from overseas in order to meet their production schedules. Nevertheless, higher commodity prices are expected to reverse the deficit over the course of 2010, pushing Australia’s trade balance back into surplus. Indeed, contract iron ore prices may increase by 65 per cent over this year alone.

EU develops bailout options for Greece

15th March, 2009

The European Union (EU) has developed a range of international support measures to help Greece overcome its increasingly fragile economy. In particular, the EU – presently comprised of 27 member nations – has brainstormed ways in which the Greek government can reduce its massive budget deficit, which presently sits at almost 13 per cent of GDP. Greece has promised to reduce this number to 8.7 per cent in 2010. To do so, it has already introduced wage cuts for public sector workers and tax increases in order to increase public revenues and decrease public expenditures, thereby helping to bring the budget deficit under control. Greece’s economy has been especially hard hit by the global financial crisis of 2007-2009. In the fourth quarter of 2009, Greece’s economy contracted by 2.5 per cent. In a sign of continued weakness of consumer spending on foreign goods, Greece’s imports plunged by 18 per cent. The weak economic conditions have also sparked significant social unrest in the country, characterised by mass protests against wage cuts and tax increases adopted by the Greek government in pursuit of its ‘austerity’ program – the term given to its efforts to reduce the budget deficit.

China denies that its currency is undervalued

14th March, 2010

China has rejected international criticism of its exchange rate policy, hitting back at complaints that it is deliberately undervaluing its currency – the yuan¬ – in order to make its goods more internationally competitive and thereby boost its exports. Contrastingly, trade groups in the US say that the yuan is undervalued by up to 40 per cent. If China’s currency is undervalued, it provides Chinese exports with an unfair international advantage – a lower exchange rate makes it cheaper for international customers to purchase goods from China, thereby disadvantaging exporters in other countries. The yuan was previously tied to the US dollar until 2005, after which China permitted its value to rise by around 20 per cent. The criticism and China’s response comes amidst fears of retaliatory protectionist measures being taken by the US against China, such as the Obama administration’s tariffs on tire imports from China.

Page 1 | Page 2 | Page 3 | Page 4 | View All