EPO 2021: Global economic recovery “quickest we have ever seen”

ANZ Banking Group Chief Economist Richard Yetsenga told CEDA’s 2021 Economic and Political Outlook that policy lessons learned from the GFC seem to have prevented the scarring that marked previous global economic crises. 

“The policy lever is the key difference between this crisis and the GFC – in the financial crisis we were slow… in this crisis there wasn’t a wait for the economic data or analysis of the problem there was just recognition and then action,” he said.

Mr Yetsenga joined Australian National University, Australian Centre on China in the World Director Professor Jane Golley; Griffith Asia Institute Director Professor Caitlin Byrne; and Asialink Business Chief Executive Officer Mukund Narayanamurti on a panel moderated by Reuters Australia and Pacific Correspondent Kirsty Needham that discussed the international economic outlook for 2021.  

Mr Yetsenga noted that the recovery has been particularly quick in the Asia Pacific. 

“If you were going to choose a hemisphere to do business in it would be this hemisphere – Asia’s more than a third of the global economy and it is already effectively above pre-pandemic levels of activity. That to me looks quite positive though of course things could still go wrong,” he said. 

Looking to the United States, Professor Caitlin Byrne said that the new Biden Administration was likely to bring “a renewed commitment to multilateralism, which will be important for Australia in the future.”

Professor Byrne said she expected to see some “distinct differences” in America’s relationship with China under Joe Biden, including a greater emphasis on “balancing issues of competition with issues of cooperation”. 

“We will have a more predictable ally in the US – that’s a positive – but a more proactive ally, particularly on key issues of health and climate change. We need to be thinking about our policy response there particularly because we have been lagging,” she said. 

Reflecting on China’s recovery from the COVID-19 pandemic, Professor Jane Golley said that “the Chinese economy will be the major contributor to global growth this year and in the years ahead, though it will slow down as it has been for a long time now.” 

Professor Golley said that China’s current diplomatic stance spells “troubled times ahead” for its relationship with Australia. 

“Australian exporters have maintained an extraordinary amount of resilience in aggregate – China accounted for a record 40 per cent of Australian exports last year despite the troubles – but a lot of sectors and firms are still reeling from the impacts of the current restrictions,” she said. 

“It is hard to know how much worse they could get if we don’t do something to improve that political relationship.”   

Mukund Narayanamurti spoke about the problems this diplomatic tension is causing Australian companies. 

Mr Narayanamurti argued that while the Australian business community has been frequently called on to speak about the relationship with China, the best way for the business community to engage with China is through a “narrow cast and not through broadcast.” 

“Many Australian companies that engage with China continue to flourish because they have been incredibly thoughtful and considered with their engagement,” he said.  

On the topic of shifting Australian trade away from China, he stressed that “neither South East Asia or India will be the next China…not necessarily only because of size and scale but because the nature of the opportunities are different.” 

“We need to look at India and South East Asia as regions that bring their own value propositions to engagement with Australia,” he said. 

Mr Narayanamurti emphasised technology opportunities in South East Asia due to their “incredibly progressive digital economy” and the demand for healthcare, financial services and consumer goods in India.