Excellent article from the ABC. It forewarns of some big issues Australia will be dealing with in the 2020s. Here's hoping we get some politicians able to cope and lead through some tricky times.
This is a taster for Dr El-Erian's interview with Elysse Morgan in two parts, on Wednesday and Thursday night on The Business at 9:45pm (AEDT) on ABC News Channel, after the Late News on ABC TV or anytime on iView.
https://www.abc.net.au/news/2019-11...nfluential-investor-mohamed-el-erian/11700696
AND:
This is a taster for Dr El-Erian's interview with Elysse Morgan in two parts, on Wednesday and Thursday night on The Business at 9:45pm (AEDT) on ABC News Channel, after the Late News on ABC TV or anytime on iView.
https://www.abc.net.au/news/2019-11...nfluential-investor-mohamed-el-erian/11700696
High risk' of trade war forcing US-China choice for Australia
Dr El-Erian marvelled at Australia's record of 28 years without recession, but said this nation is not thinking enough about the significant risk that the unpredictable trade war between the US and China poses.
'Every continent is suffering'
A combination of the US-China trade war and Brexit has dragged global manufacturing into recession, according to market analysts.
"If the trade tensions continue, if the recent de-escalation that we have seen proves to just a short-term truce, there is a very high risk that things get so tense between China and the US that Australia may face a binary choice — do you want to continue to do business with China because its your main market, or do you want to continue the very special security arrangement with the United States?"
Dr El-Erian cited the recent example of the US threatening to cut ties with German companies if they continued to do business in Iran.
"Australia does depend on certain export types, but also on China, which is your major market, and China is having to deal with a completely different situation where it can no longer rely on the global economy to facilitate internal reforms," he observed.
"For China, the global economy has gone from being a tailwind, which opens up markets and enhances productivity, to a significant headwind and the jury is out as to how they will manage that."
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Dr El-Erian said time is running out and the global economy is coming to a dangerous "T-junction" — where one road sees governments stepping in with stimulus and the other leads to recession.
"If that hand-off [from central banks to politicians] doesn't happen, then it is recession, financial instability and an even more complicated political set-up — that is where we are heading," he warned.
"We are getting closer and closer, and the longer the policy hand-off is delayed, the more the probabilities shift in favour of the bad outcome.
"I have it at 60/40 chance — 60 that we'll end up at the bad outcome, 40 that we end at the good outcome."
He does not put the chance of a major economic and market fallout any higher because, for now, he believes that politicians will start to listen to the pleading from central bankers.
"If that hand-off [from central banks to politicians] doesn't happen, then it is recession, financial instability and an even more complicated political set-up — that is where we are heading," he warned.
"We are getting closer and closer, and the longer the policy hand-off is delayed, the more the probabilities shift in favour of the bad outcome.
"I have it at 60/40 chance — 60 that we'll end up at the bad outcome, 40 that we end at the good outcome."
He does not put the chance of a major economic and market fallout any higher because, for now, he believes that politicians will start to listen to the pleading from central bankers.
