2020 Sir Donald Hibberd Lecture: Global Economic Recovery
The Sir Donald Hibberd Lectureship was established in honour of the Sir Donald Hibberd, one of Australia’s great nation builders. Sir Donald Hibberd held influential positions in the public service and contributed greatly to the success of the aluminium industry in Australia. He was a member of the board of the Reserve Bank of Australia and the council of the University of Melbourne.
The Lectureship was established by the late Lady Florence Hibberd with support from the University of Melbourne and Comalco, in memory of her husband. Each year the Lectureship brings an esteemed academic who is distinguished in their field to Melbourne Business School. Melbourne Business School is honoured to host these local and international experts who continue the legacy of Sir Donald Hibberd and Lady Florence Hibberd in building our next generation of leaders.
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This webinar is presented thanks to the generous support of the Sir Donald Hibberd Lectureship Endowment.
The impacts of COVID-19 on economies worldwide in 2020 will be devastating.
Eventually, though, economies will recover, and in this presentation, Professor Mark Crosby discussed the features of this recovery and the shape of the world economy in 2021 and beyond. Several factors were at play before COVID-19 became a pandemic – widening inequality in many countries, a retreat from globalisation in the United States, and a heightened nationalism in China.
Watch Professor Crosby below, as he speculates on how these forces are likely to shape the remainder of this decade, and what countries can do to support their economy going forward.
Download presentation slidesYour questions answered
Why is China predicted to grow for 20/21? India, is understandable, however should it not be expected that the potential conflict between China and a majority of 1st world countries would not have a bigger impact?
"I think that the OECD estimate of 8% growth in 2021 is optimistic for China. The new normal growth rate for China for the next few years is 5 to 6 percent. The difference with India will be driven by how the OECD sees Indias Covid experience. The conflict with other countries isn’t likely to impact China’s growth for a while yet. China’s positive growth this year has been driven by a very strong recovery already in industrial production and exports."
- Professor Mark Crosby
Do you see much scope for Australian exporters to increase their exports to Asia Pacific (excluding China) over next few years?
Is Australia's support low due to the fact that we are a couple of months behind the other countries? Would we not see a higher number come 2021?
"I don’t think so. I think that our government has been conservative, but we’ve also been impacted less than other countries (with the exception of what is current in Melbourne). In terms of support I think that the same will be true next year. In Europe there appears to be the start of a significant second wave, so they are going to require more support."
- Professor Mark Crosby
Globalisation doesn't have to be whole-of-globe. In some cases, it opens us to strategic errors in trade. So how do we shape public and private trade strategically?
"I have seen Martin Wolf speak to this point a couple of times (make sure you attend his oration!!). He argues that we’re going to see a very different form of globalisation – not so much strategic, but more regional, more strategic. In the case of our region the relationship between ASEAN, South Asia and Australia is critical. Although populations are very different in these countries/groupings GDPs are order of magnitude similar and there is great complementarity in production and trade opportunities. "
- Professor Mark Crosby
I am interested in understanding the possible implications to a dramatic increase in debt to nation states. Furthermore, is there a historical precedent here on which to draw upon?
"There are a ton of historical precedents. In their detailed book on this (titled “This Time is Different”) by Carmen Reinhart and Kenneth Rogoff, they outline hundreds of historical cases where debt has gone above 90 percent of GDP. Countries most usually get out of this by inflating away the debt, or by default. Otherwise it has to be significant austerity."
- Professor Mark Crosby
What will be the pressure on wages in the next 2 to 3 years will it enable us to diversify into manufacturing and agriculture
"In Australia and SE Asia there is a significant opportunity in manufacturing. Advanced manufacturing in Australia, and lower skill manufacturing in many SE Asian countries as third countries diversify out of China. The challenge will be to upgrade logistics, keep wage costs under control and reduce red tape to support manufacturing and agriculture."
- Professor Mark Crosby
Instead of implementing monetary policy alone, why don't governments combine the monetary and fiscal policies together and apply them in a milder way to achieve a more rapid and safe recovery growth?
"That has been the case in most countries. In Australia the fiscal kick has been about 10 percent of GDP. The RBA can potentially create just as big or bigger level of support, but both have been very supportive of the economy in every economy."
- Professor Mark Crosby
Which sectors in Australian economy do you see recover faster than others?
"Tourism, hospitality, and education will be the slowest to recover, and then businesses that are exposed to those sectors. Even in financial services, which has little direct exposure to covid there is an indirect hit through these other sectors. I guess the only area where there has not been a hit has been government services."
- Professor Mark Crosby
Will we ever get back to the riches of the longest run of growth that we’ve just enjoyed? If so, when?
"There are some who are pessimists (see Robert Gordon’s TED talk on long run US growth) and those who are optimists (see Brynjolfsson and McAfee on the same). I tend to side more with the latter, but I think we might not see strong growth before 2024 or thereabouts because of Covid – 2021 being the end of the virus and around 2 to 3 years to recover in the sense that unemployment and the economy is back to more normal levels. The other thing to remember is that demographics will reduce GDP growth (on that Gordon is correct) so for us to get back to where we were will require technology and innovation to more strongly support growth."
- Professor Mark Crosby
Given need for support for innovation, new-type jobs, new markets etc - why continue to support businesses entering insolvency?
"Interesting point. Schumpeter argued for creative destruction to create the space for innovative businesses to survive. I would argue that covid has created so much destruction that there is plenty of room for innovative industries to grow and thrive, and we still need support for struggling businesses in the short run. But you are correct in the sense that I think it would be a big mistake to focus on supporting weak businesses and not have a strong policy focus on new businesses and innovation."
- Professor Mark Crosby
About our speakers
SIR DONALD HIBBERD LECTURER
Mark Crosby joined Monash University as the Director of the Bachelor of International Business Program at Monash Business School in October 2016. Prior to this Mark was on the faculty and held a number of administrative roles including Associate Dean (Programs) and Associate Dean (International) at Melbourne Business School. Mark’s academic interests are in international macroeconomics, with a particular interest in policy issues in the Australian and Asian regions.
DEAN, MELBOURNE BUSINESS SCHOOL
After almost 20 years as a professor at the University of Melbourne and Melbourne Business School, Ian became a public figure as the chairman of the federal government's Competition Policy Review (Harper Review) and currently serves on the board of the Reserve Bank of Australia. Ian has also been a partner at Deloitte, an Advisory Board member at the Bank of America Merrill Lynch (Australia), and as of May 2018, returned to lead Melbourne Business School as its sixth Dean.
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