Author

Nigel Lake

Title

Hopenomics or Leadership? Securing Australia’s long term prosperity in an uncertain world.

Synopsis

At Wednesday’s Breakfast with the Economists in Sydney, Australia, ANZ Chief Economist Warren Hogan drew a clear comparison between the current global economic environment and the 1930s. Specifically, he commented that the world has avoided another Great Recession, thanks to the relatively rapid fiscal response to the global financial crisis (GFC) made by governments around the world. Nevertheless, he said we are experiencing a new Great Depression, caught by a live example of Keynes’ liquidity trap. As Warren said, there is no amount of liquidity or quantitative easing that will, by itself, drive a return to stronger credit appetites on the part of individuals or businesses globally. Meanwhile, most western economies simply do not have the financial strength for governments to step in and provide real leadership through near term investment. In contrast, China has been able to increase domestic capital investment significantly, supporting its own economy during a period of reduced offshore demand.