Playing to a packed house of 800-plus financial bods were the five
panel members addressing this year’s Financial Standard Chief Economists Forum
at the Westin Hotel in Sydney this morning.
As everybody’s favourite economist, Master of Ceremonies Don Stammer,
pointed out in his introductory remarks, macro-economic forces are playing an
arguably unprecedented role in the shaping of world financial markets – which
could explain the record attendance at this year’s event.
Five snappy presentations provided audience members with a range
of opinions about cause, effect and, most importantly, future direction of the
world economy in 2012, along with some unexpected laughs.
Slow
growth to continue
First off was Richard Gibbs, Macquarie Group Chief Economist, who painted
a contextual picture of market performance that broadly heralded a continuation
of the relative gloom that has dominated the world landscape. He pointed to dreary
Aussie (and other) equities performance, strong bond performance and the
likelihood of more of the same if the less-than-rosy conditions that generally
follow an inverted yield curve come about. Accordingly, his general forecasts
fall in line with the most recent from the IMF and others of slower-than-previously-predicted
world and local growth.
Throw away
the Prozac
Then in bounced Bob Baur, Global Chief Economist from Principal
Global Investors, who with irrepressible energy posed the question: will
investors need to continue their Prozac in 2012 – or can they begin to wean
themselves off it? Focusing on the US economy, Bob was decidedly more bullish
in his reading of the outlook. He points, among other things, to increases in
US manufacturing, productivity and a gradual upturn in employment as signalling
a definite recovery – no double dip – in the US – with corresponding flow-on
benefits to other world economies.
Hello
world …
Speaker three was the peripatetic Tim Harcourt, Chief Economist of
Australian Global Economics, Australian
School of Business UNSW. A.k.a The Airport Economist, he took us on a
whirlwind continent-by-continent tour (complete with slideshow – gosh that man
works hard) in which he summarised regional economic conditions and likely outcomes
from their interplay. Again, he took a more bullish global view, highlighting
the burgeoning of consumption in emerging markets and the continuing importance
of China and India to Australia’s own prospects. Along with the other
presenters, he was at pains to point out that despite the scare- talk of
China’s ‘cooling off’ and its potential effect on our own - and other -
economies, some perspective is required. To paraphrase Bob Baur, China’s growth
is merely moving from white hot, to hot – tales of its demise are decidedly
exaggerated.
An overdue
rebalancing
Next up was Clifford Bennett, Chief
Economist from the White Crane Group,
who took a truly macro view in which, once again, there was more than a grain
of optimism. His view was that the time is well past due to forget the models
and preconceptions of the past. Instead, global economic movements such as the
decline of first world economies in general and the US dollar in particular are
signs of the inevitable long term rebalancing of markets in the face of
dramatically changed world conditions. Under this view, emerging markets are in
fact ‘emerged’ and need to assume a new more central position in global
economic reckoning. He also pointed out that it would take only a few pleasant
surprises – for example, an uptick in US performance and the Eurozone managing
to scrape through its debt issues – for the de rigueur doom and gloom to be
replaced by something a little more gangbusters.
The ‘P’ word
To wrap up, stalwart Saul Eslake, Chief
Economist from Bank of America -
Merrill Lynch Australia, took us through some more contextual facts and figures
to highlight some more disturbing trends already alluded to by a number of the
other speakers. It seems that these are likely to occupy more and more of the upcoming
national economic debate and it may be well past time. Specifically, he flagged
plummeting productivity as a key structural issue facing first world countries
in general and Australia in particular. His figures revealed not only that ours
is at an all- time low compared to that of the US; he also busted the myth that
such drop-offs in productivity are related to the nature of our resource-heavy
economy and the lengthy lag times, effects of high commodity prices on measures
(volume v. value) and so on. Along with
a number of the other panellists, he sounded a warning that this country needs
to make intelligent use of the resources boom to ensure it provides long term
benefits across the whole of the economy or risk a crushing fall when it
eventually – and it’s not an if, but a when – comes to an end.
Onward and upward?
The Q&A session that followed included some veiled debate and (potentially lively)
discussion about productivity and debt; the political will or lack thereof to
address both; the issue of the equitable distribution of the proceeds of
increased productivity, and the virtues or otherwise of a regulated versus a
deregulated labour market (Tim Harcourt pointing out that real wages in the US
have not increased since the early 1990s and the divide between the haves and
have-nots continues to yawn …) But that’s another story for another day.
Guest blogger, Kaitlin Walsh, is BlueChip Communication's Director of Media and Content
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