There’s reason to be optimistic about the state’s economic recovery in 2021, with a skills shortage looming as a potential challenge.
Ferguson, 69, was vice chairman of the Fed’s Board of Governors from 1999 to 2006, the first Black person to hold that post. After the September 11 terrorist attacks, then Fed chairman Alan Greenspan was overseas and deputised Ferguson to carry out what was essentially the central bank’s war plan for market crises. He has spent about 12 years as the chief executive of TIAA, arriving there from the reinsurance company Swiss Re, where he headed financial services. He steered TIAA through the 2008 financial crisis. The organisation oversaw $1.2 trillion as of September 30, including the retirement savings of many Americans.
“We caution that the spikes in production seen in the various sectors in October 2020, are an exaggeration of the true recovery on the ground, as they have been driven by a large component of pent-up demand that may not sustain after the festive period is over,” the agency’s Principal Economist Aditi Nayar said.
The factors which remain to be watched are the pace of government spending in the second half of the fiscal, after the unexpected contraction recorded in the September quarter, she added.
The potential re-imposition of restrictions in one or more states on account of a fresh surge in CVID-19 infections, may temper the momentum of recovery in the coming months, she warned.
The agency said that available trends for early November are suggesting some moderation in these spikes in the ongoing month.
In October, 10 of the 17 high frequency indicators tracked by the agency showed a pick-up, including GST e-way bills where growth accelerated to 21.4 per cent as compared to the year-ago period, as against 9.4 per cent in the preceding September.
The agency, however, said it is “circumspect” about the durability of the spike in GST e-way bills after October.
The 8.8 per cent growth in electricity was driven largely by a favourable base, it said, pointing out that the same was down 13.3 per cent in the year-ago period.
It added that subsequently, the growth in electricity demand has moderated to 5.3 per cent in year-on-year terms during November 1-20.
WHAT A DIFFERENCE a family row makes. Only a few weeks ago, the Turkish lira was plummeting from one record low to another as the central bank sat on its hands, foreigners were dumping Turkish stocks and the country’s finance minister, Berat Albayrak, was arguing that exchange rates did not matter. Today the currency is enjoying a big rebound, the stockmarket is soaring, and officials are talking about the need to reform the courts and keep inflation in check.
For more than two years, Turkey’s autocratic president, Recep Tayyip Erdogan, had relied on Mr Albayrak, his son-in-law, to run the economy. Mr Albayrak nearly ran it into the ground. With banks dishing out credit at rates below inflation to revive growth, the lira sank by over 40% against the dollar, burning a hole through the savings of millions of Turks. The central bank and state banks wasted at least $100bn in precious foreign reserves in an abortive attempt to salvage the currency.
Mr Erdogan finally slammed on the brakes. On November 7th he sacked the central-bank governor and replaced him with one of Mr Albayrak’s rivals. A day later, an indignant Mr Albayrak, once touted as his father-in-law’s prospective successor, stepped down. Since then the lira has responded with its best weekly performance (a 10% rally) for two decades.
The change in tone has been remarkable. The new central-bank governor, Naci Agbal, and the new finance minister, Lutfi Elvan, are making all the right noises about stabilising the currency and bringing inflation down to single digits. The justice minister, who has presided over a sweeping crackdown against government opponents since 2017, has discovered a passion for the rule of law, asking judges to comply with constitutional-court rulings and help improve the climate for foreign investors. Those investors are needed: reeling from the pandemic, the economy shrank by nearly 10% in the second quarter.
Even Mr Erdogan, a sworn enemy of high interest rates, now says Turkey may have to swallow “a bitter pill”, meaning a dose of austerity. On November 19th, the central bank duly imposed a spectacular rate rise of 475 basis points.
Mr Erdogan had to surrender to market pressure and sack Mr Albayrak. “There was a real chance that the thing would have snowballed and you would have a full-blown currency crash” unless Turkey’s leader had changed course, says Paul McNamara of GAM Investments. Another option would have been to seek help from the IMF, something Mr Erdogan had previously ruled out. The president would also have had to pay a political price. A group of 30 to 40 ruling-party parliamentarians is said to have threatened to defect to the opposition unless Mr Albayrak resigned. The overhaul of Mr Erdogan’s economic team has at least bought him some breathing space, says Ugur Gurses, a Turkish economist.
It may also help Turkey’s leader to cope with the loss of a good friend in Washington. For the past four years Mr Erdogan has been able to count on Donald Trump to look away while Turkey evicted American troops from parts of north-eastern Syria, clashed with European allies in the Mediterranean, deployed Syrian mercenaries to Libya and Azerbaijan, and locked up thousands of people on terror charges thinner than baklava dough. Mr Trump also shielded Turkey from sanctions over its purchase of an S-400 air-defence system from Russia. He may have tried to hold up an investigation into a Turkish state bank accused of laundering Iranian money.
Under Joe Biden, who earlier this year referred to Mr Erdogan as an “autocrat” who “needs to pay a price”, things will get tougher. America will draw red lines and enforce them more credibly, says Lisel Hintz of Johns Hopkins University. Mr Erdogan will have less room to cut deals with the White House. Sanctions over the S-400 will be harder to sidestep, especially after Turkey tested the system in October. “Ankara will no longer have the kind of protection provided by Trump and has to get its house in order, politically and economically,” says Asli Aydintasbas of the European Council on Foreign Relations, a think-tank. “There may be no direct causality, but there’s no doubt Albayrak’s resignation has to do with Turkey being more prepared for the challenges ahead.”
Yet there is a limit to how far Mr Erdogan is willing to go to save the lira and placate the new American administration. For all the recent talk of reforms, he is not about to loosen his grip on national institutions, give up on growth or stop tormenting opponents. His prosecutors recently opened an investigation into Ekrem Imamoglu, the opposition mayor of Istanbul, for criticising one of the president’s pet projects, a canal between the Black and Marmara Seas. Whether the central bank makes the right call still depends less on its governor than on the president. Mr Albayrak may be a useful scapegoat, but he is not the true problem in Turkey.
Even if Mr Erdogan were sincere about democratic reforms and the need to patch things up with his Western partners, the coalition he has sealed with his country’s ultranationalists, who support him in parliament and in the security forces, will make it difficult for him to take the right steps. “He has locked himself into this path,” says Ozgur Unluhisarcikli of the German Marshall Fund, another think-tank. “I can’t see how he can make substantial changes without destroying the alliance structure he has set up.”
Mr Erdogan must hope the beginning of the Biden presidency is better than the end of the Trump one. On November 16th Mr Trump’s secretary of state, Mike Pompeo, told a French newspaper that America and Europe needed to deal with Turkey’s “aggressive actions” over the past few months. A day later Mr Pompeo arrived in Istanbul, where he paid a visit to the Ecumenical Patriarch to discuss religious freedoms in Turkey (and probably bemoaned Mr Erdogan’s conversion of the Hagia Sophia, an ancient Christian basilica, into a mosque). He did not meet a single Turkish official. ■
This article appeared in the Europe section of the print edition under the headline “On the edge”
The last nine months have been dominated by the health emergency of coronavirus.
We’ve stocked up on hand sanitiser and searched for the most comfortable face mask.
We’ve become so horribly familiar with the weekly choreography that we know which days of the week have the highest death tolls and when to expect a news conference from the prime minister.
Chris Whitty and Sir Patrick Vallance make such regular appearances in our living rooms that we feel on first name terms (or in the case of JVT, initials are enough).
And the politics, too, has been dominated by the health crisis – ordering lockdowns, spending billions on contracts, furloughing, shielding the NHS at all costs.
But this week, the previously all-encompassing health emergency will have to shift to make space. It won’t be a pivot – the situation is still too perilous for that – but the developing economy can be ignored no longer.
On Sophy Ridge on Sunday this week we’ll be speaking to Chancellor Rishi Sunak ahead of next week’s Spending Review, which will lay bare the full extent of the economic crisis.
UK debt is now bigger than the entire economy and now stands at over £2trn – or 100.8% of GDP.
Around 10 million jobs have been furloughed throughout the crisis – with the government stepping in to directly pay up to 80% of their wages. The scheme has been extended – at significant cost – until the end of March.
Wednesday, when Mr Sunak will put forward the one year spending review, will be dominated by the appalling public finance figures.
And his immediate challenge will be to at least begin to set out a plan to rebalance the books, with an expected public sector pay freeze and spending restraints across government departments (not an easy sell for a prime minister and a chancellor who promised an end to austerity).
Rebalancing the finances is a colossal task. But there is an even bigger challenge for the chancellor: charting a road for the economy out of the devastation that coronavirus has caused.
The Treasury is increasingly worried about the longer-term economic consequences of the pandemic.
Some industries – airlines being the obvious example – may never fully recover. Others such as hospitality and events will take time to get back on their feet. Where will the jobs of the future come from instead?
There is also a concern about the unprecedented move to home working – a situation that many are embracing.
But if major corporations have proved that their staff can effectively work remotely, there will be consequences.
If proximity to the office is no longer an issue, British workers will no longer be competing for jobs against people who can base themselves in the UK, but those in Beijing, Bangladesh or Brazil as well.
What will this mean for employment in the future? How do we build an economy fit for the post-COVID world?
They are questions that at some point the chancellor must answer.
Watch Sophy Ridge On Sunday live from 8.30am on Sunday, followed by Sophy Ridge: The Take at 9.30am.
Queensland LNP leader David Crisafulli has pinpointed “economic credibility” and “transparency” as the party’s two key priorities going forward in this next term.
November 15, 2020
(Reuters) – China’s President Xi Jinping has called for further development of the Yangtze River economic belt as part of the country’s “dual circulation” strategy, the official Xinhua news agency said on Sunday.
Xi first raised the concept of dual circulation in May this year, amid a rift with the United States, and later explained China would rely mainly on “internal circulation” – the domestic cycle of production, distribution, and consumption – for its development, supported by “external circulation.”
Speaking in Nanjing, capital of Jiangsu province, on Saturday, Xi said provinces and cities along Asia’s longest river – which flows from west to east China – should promote “coordinated development” and “guide the orderly transfer of capital, technology and labour-intensive industries in (Yangtze river) downstream regions to upstream and midstream regions.”
They should also “actively open their markets to the world,” he said, according to Xinhua.
The sprawling Yangtze economic belt spans 11 Chinese provincial-level regions and covers around 2.1 million sq km, accounting for 21% of China’s total land area and more than 40% of its population, according to state media.
(Reporting by Tom Daly and Roxanne Liu. Editing by Jane Merriman)
The largest trade deal in history has been signed, with 15 countries including Australia agreeing to the pact, which covers 30 per cent of the global economy.
In heralding the benefits of the deal, Trade Minister Simon Birmingham again voiced concern over China’s trading behaviour, urging Beijing to respect international trade rules and “focus on evidence” when making decisions about imports of Australian products.
Leaders agreed to terms on the Regional Comprehensive Economic Partnership (RCEP) at the Association of South-East Asian Nations (ASEAN) summit in Bangkok last year.
The signing on the dotted line was expected to happen late on Sunday during this year’s virtual meeting.
The countries involved are Australia, China, Japan, South Korea, New Zealand and the ten members of ASEAN, including Indonesia and Vietnam.
The RCEP pact, which has taken eight years to negotiate, surpasses the Trans-Pacific Partnership (TPP) in scale after the United States pulled out of that agreement under the Trump Administration.
“The real benefits here are two-fold — one is for our farmers and exporters, they get a more common set of rules across all 15 nations,” Senator Birmingham said on Sunday.
“The other is for our services export industry, they get significant new access across financial, banking, aged care, health care, education and other types of services industries, right into the provision of architectural, engineering or planning services.
“This is about making sure that we have the opportunity for that part of the economy, the services industry, to be able to grow and be able to get the same type of uplift in trade benefits across the region that our goods exporters have had over recent years,” he said.
Much of the focus of RCEP is on standardising trade rules across countries, making it easier for people to do business.
India had been at the negotiating table for much of eight years of talks, before pulling out last year.
“That diminishes some of the value for Australia, particularly given India would’ve been the one RCEP partner with whom we did not previously have any type of free trade agreement,” Senator Birmingham said.
“However, the value of RCEP is still there.”
The deal also does not include the United States, despite the country having $US2 trillion ($2.7 trillion) in trade with the countries which are involved.
Australia again clashed with China over its military activities in the South China Sea during the ASEAN meeting.
Prime Minister Scott Morrison joined other leaders condemning “destabilising actions” in the contested waterways.
Chinese state media quoted Premier Li Keqiang as telling the meeting that China was “firmly resolved in safeguarding the region’s peace and stability”.
Australia’s trading relationship with China has strained in recent months.
Barley exports were the first to be targeted, hit with significant tariffs, while meat from some Australian abattoirs was also suspended.
Chinese authorities have launched an investigation into allegations Australia has been dumping wine into the country at low prices, distorting the market.
There have also been concerns raised about Australian exports of cotton, sugar, timber and copper, while millions of dollars of rock lobsters were left stranded at Shanghai Airport earlier this month.
“I welcome the fact that Australia and China have been able to continue as partners in the RCEP agreement,” Senator Birmingham said.
“I urge all parties to the RCEP agreement to engage in implementing not only the letter of it, but also the spirit of it,” he said.
The Federal Opposition said it would pore over the details of the trade deal closely, but warned it could not be used as a distraction from the serious deterioration of the relationship between Canberra and Beijing.
Australian ministers have not been able to talk to their Chinese counterparts for months.
“We’ve got big problems with China at the moment, getting goods into China,” Labor frontbencher Jason Clare said.
“It’s pretty extraordinary that after being in government for seven years, this Government can’t get anyone in Beijing to answer the phone.
“The bottom line is, when you’ve got a country which is your biggest trading partner — we make one in three dollars from trade from China — then you’ve got to lean into it and make sure you’ve got the contacts in China to fix things when there’s a problem,” Mr Clare said.
Senator Birmingham was hopeful an incoming US administration under Joe Biden might take a less protectionist approach to trade than that of his predecessor, Donald Trump.
Mr Trump pulled the United States out of the TPP, arguing it was a bad deal for his country.
The remaining signatories to the deal went ahead with it anyway, and Senator Birmingham argued the “door … is always open” to the US returning.
Mr Trump snubbed the ASEAN meeting again this year, for the third consecutive time.
US National Security Adviser Robert O’Brien said Mr Trump regretted he was unable to attend the online summit, but stressed the importance of American ties with the region.
“At this time of global crisis, the US-ASEAN strategic partnership has become even more important as we work together to combat the coronavirus,” Mr O’Brien said in remarks at the opening ceremony.
Trickle-down economics is the theory that giving benefits to the most well-off in society, such as tax cuts for the wealthy, will boost the economy as the money flows down like water.
In Victoria, the state worst-hit by the human and financial toll of the pandemic, the State Government will release its budget Monday week.
They’ve gone with a very different way of boosting the economy: firehose economics.
The State Government appears to be using the opportunity of record-low interest rates to hose the community in cash, aiming to douse the fires of the recession, create jobs, and help people forget the mis-steps and failures that led to a fatal second wave of the coronavirus.
In April, the Government took out a $24.5 billion loan.
Based on projects already announced and tips about where the money is going, they’re going to spend an eye-watering amount of it, fast.
There’s plenty already announced.
Tipped for Sunday, but unconfirmed, the state is expected to announce it will spend $8 billion to build and renovate social housing.
To put that eye-watering figure in context, the recent Federal Budget put aside $1 billion in social housing funding for the entire nation.
That money wasn’t for actual building, it was simply available as low-cost loans if states or organisations wanted to fund projects.
Between lockdown, curfews, home-schooling, mandated mask-wearing and the ongoing mandate to work from home if you can, it’s been a long year in the Education State.
It’s an astonishing 547 days between the last state budget and this one: it had been dealing with a booming population and a job-pumping infrastructure binge.
Treasurer Tim Pallas stood up in Parliament to state: “$107 billion of state capital projects are commencing or underway. Now remarkably, we are currently investing more in Victoria than the Commonwealth intends to spend across the entire nation over the next decade”.
His colleagues roared for him to repeat it, and he happily did.
The Commonwealth might dispute the total, but probably wouldn’t step into the argument: it’s historically under-funded infrastructure in the state despite it comprising a quarter of the nation’s population and economy.
Victoria was booming before the pandemic, on track to over-take Sydney as the nation’s largest city.
But there’s a reason to think Victoria could spend its way to prosperity.
Since being elected in 2014 and endorsed in a 2018 landslide (Labor holds 55 of 88 seats in the lower house), the Andrews Government has built the infrastructure for spending money, on infrastructure.
The Level Crossing Removal Authority and the Victorian School Building Authority, for example, do what they say on the tin.
With a price-tag smaller than mega-projects — such as the train tunnels and freeways also being plonked through the city — they spend taxpayer’s debt-funded money on projects in a staggering array of locations that make a physical difference to communities.
The optimist says an authority with a focused goal is more likely to achieve it and gathers knowledge about how to better meet its aims as it goes about its work.
For example, removing the intersections of train tracks and road crossings has become cheaper as the contractors involved have gained experience in the work.
The cynic says an authority is a political tool.
The State Government has built the architecture for spending money quickly across a massive geographic spread.
On their website there’s a map with where the projects are.
Zoom out and it becomes clear: nearly every community gets a prize.
No one will forget 800 deaths, the months of deprivation and the pain of Victoria being sealed off from Australia and the world as it worked to crush the virus.
But in two year’s time, when the State Government is up for re-election, a solid economic recovery will probably buy them forgiveness.