07 June 2019
Bob Cunneen, Senior Economist and Portfolio Specialist
* The countries collectively known as the Group of Seven (G7) consists of US, Canada, UK, France, Germany, Italy and Japan. BRIC refers to Brazil, Russia, India and China.
Global economic growth is slipping. President Trump’s trade war, higher US interest rates as well as acute political risk in Europe and emerging markets are casting a long shadow over the global economy. From the solid 4% annual growth pace in early 2018, global growth has slowed to 3.6% in the opening quarter of 2019 (blue line). Notably countries such as Argentina, Brazil, Italy, Mexico and Turkey have seen their economies stagnate in the past year.
While every country can influence their economic growth with their own domestic budget and interest rates settings, countries can also be held hostage by global politics. The trade war is taking a toll well beyond the price of tariffs. Trade tensions appear to be damaging global business confidence, resulting in corporations becoming more cautious about investment. Businesses are wary that their industry could be the next target of President Trump’s twitter tirades.
Australia has its own specific challenges. The drought, high household debt, falling house prices and soft consumer spending can largely account for Australia’s current slow growth of 1.8% for the past year (red line). However our domestic concerns can also be further magnified by global problems. A reckless escalation of the trade war could see both Australian and global economic growth ‘slip slidin’ away’ towards recession.
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