Given the delays in crafting a Euro-wide credible policy response, and the fiscal contractions now underway in many Euro-zone members, Europe will almost certainly return to recession next year, with the potential for it to be deep and drawn out.
USA
the US economy is now on the path to a recovery — albeit a slow, and tentative one.
However, the US’ public balance sheet remains in a work in progress. The failure of the Congressional ‘Supercommittee’, tasked with finding US$1.2 trillion in budget savings has now triggered automatic spending cuts. These could reduce GDP growth by up to ¾ of a percentage point in financial year 2013, a potentially significant shock to what is likely to be a still modest recovery.
Asia
As the size of this Asian middle class expands and incomes rise, they will exhibit consumption patterns akin to advanced economies — this creates a massive potential market for our key knowledge-based exports like education and high-end manufacturing, as well as tourism. As living standards improve, purchasing power rises and food consumption patterns change, so we can also expect to see growing demand for agricultural and soft commodities as new members of the middle class have greater opportunities for a more protein-rich diet.
No one should be under the illusion that the growth paths of emerging economies, whether China or any other country, will be smooth and uninterrupted — there will be cycles of growth, but we anticipate these will be around a strong rising trend when looked at in decadal terms.
Australia
..can take some comfort from its starting position. We are located in the fastest growing region in the global economy with a number of opportunities likely to present themselves over the next decade. Equally, the flexibility of our economy and our medium-term oriented policy frameworks have assisted Australia manage the impacts from external volatility.
The policies that have stood us in good stead in the current volatility will also provide a good foundation for the policies we need to pursue to reap the opportunities in prospect over the next decade and beyond.
