What is going on with the world economy?

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An old Chinese curse says, “May you live in interesting times.” 

That curse seems particularly relevant when it comes to trying to keep abreast of what is happening in the world economy. Uncertain economic times lead to hesitation, risks and opportunities for businesses the world over, with lower confidence levels affecting economic growth and having flow on effects to economic indicators like interest rates.

The economic world seems to be in a state of upheaval and in such times it can be really hard to make decisions on a business and personal level. Keeping up with what is going on is the first step to good decision making.

Here is a short summary of the key economic events occurring in the world right now and the possible effects on Australia’s economy.

  1. The trade war between the United States and China. This was has been largely instigated by the Trump administration in response to what they see as the American economy being handicapped by existing trade arrangements.
    Their strategy to address this has been provocative and adversarial to the Chinese. They have raised tariffs in a number of areas and the Chinese have responded accordingly. Australia is a major trading partner with both economies and our farmers and miners in particular, have been caught in the crossfire. While the trade war continues, there will be continued pressure put on these sectors of the Australian economy.
  2. Brexit. Behind the rhetoric and hysteria that surrounds Brexit lies a tangled web of trade deals, agreements and treaties that impact Britain’s ability to trade with the European Union.  There is much posturing on both sides as the stakes are very high. Britain is not the only country making noises about leaving the EU – Italy has made it clear that they are contemplating leaving and the ongoing riots in France show a discontent within the population for arrangements to continue as they are. The whole Brexit situation threatens the EU as we know it and may well present numerous trading opportunities for Australian businesses. On the flip side, it is fair to say that the world’s financial sector is very nervous about Brexit.
  3. Syria. The situation in Syria is incredibly complex with all of the world’s superpowers having a stake in the outcome. If there is such a thing as a Trump doctrine, it appears to be in play n Syria. Trump campaigned on putting an end to being involved in what he described as needless wars and he has been determined to get out of Syria (and Afghanistan for that matter) since he took office. Extracting American solders from the Middle East appears to be much harder in practice than theory.  The vacuum left behind, leaves room for other countries to gain territory. Turkey has moved into what was being claimed as Kurdish territory and for a brief period it looked like all out war could break out. A peace deal of sorts has been brokered but things remain in a state of flux.
    The whole Middle East is a major economic flashpoint as it still remains the world’s major source of oil. One of the Syria’s key strategic points is the proposed pipeline between Syria and Russia, which, if operable, would alter the world’s energy dynamics.
    While Australia has no huge stake in Syria itself, our economy’s reliance upon oil makes uncertainty in the Middle East problematic.
  4. In addition to these major flashpoints, there are unresolved issues in Hong Kong, Spain, Afghanistan and much of Europe. Each would normally demand much more air time and analysis but with other events occurring these issues have been pushed a little to the back burner.

We do indeed live in interesting times and Australia, having close ties with America, China and Britain has a vested interest in the resolution of all of these issues.

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