Economics of climate change

The Stern review is the most comprehensive economic based report into the impacts of climate change, it also explores possible actions which need to be taken and the consequences of taking no action. Lord Stern is British economist.

The Stern Review states "our actions over the coming few decades could create risks of major disruption to economic and social activity, later in this century and in the next, on a scale similar to those associated with the great wars and the economic depression of the first half of the 20th century. And it will be difficult or impossible to reverse these changes."

One of the considerations of climate change action by Stern is that developing nations should have the opportunity to reach the same level of living standards as developed nations.

Stern recently updated his report to say that 2% of GDP needs to be invested to avoid the worst impacts of climate change.

Are we out of the recession?

Well for a political junkie like myself a week when the great smirker Peter Costello retires after all the time he has spent coveting the leadership of the Australian Liberal Party, is a week to comment upon.
Costello despite the efforts by Howard to downplay his efforts deserves credit for the position that the Australian economy now finds itself. As Peter Hartcher stated in his article this week,

"Keating imposed the structural reforms that woke Australia from its economic coma and created the beginnings of a modern, competitive economy. And Costello imposed the discipline to prevent the political system from bogging the country down in a mire of government debt"

There is no doubt that without Costello the Howard government would have blown a considerably higher proportion of the commodities boom. The result is that Australia has been able to cope with the recession better than any other developed country due to the subsequent budget surpluses and negative public debt. The following graphs from the Federal Treasury show Australia's Economic growth to be higher than all of the top 20 economies and to have lower net public debt than all of the top 5 economies.








However the question that needs to be answered is - Is Australia out of the recession?? (give the poll a go). After reading Gittins from the 13/06/09 a number of points are raised. Our recent trade performance has been exceptional- why? Well the Australian dollar feel sharply which meant that exports received an advantage and imports were higher. Combined with lower demand for imports by Australians in a downturn has meant that our trade performance has been very good. In addition during a recession manufactured good demand falls- now we our economies structure is weighted towards services and commodities. The demand for these has been steady.

However with the dollar heading back to 80c/US, business confidence picking up and thus higher imports combined with the prices gained for our exports sliding the future for Australia is not rosy yet.

Yr 12 Eco; An interesting week (updated 11/3)

The past week has been an interesting week in the world of the Australian economy. Statistics seem to drive the political cycle and this makes for interesting viewing in the times we are currently living.
On Tuesday after the RBA decided to hold interest rates on hold for March (after 5 succesive cuts of the cash rate from 7.25% to 3.25%) in a 'vote of confidence'.
In his statement on 3/3/09 Glenn Stevens stated "In Australia, demand has not weakened as much as in other countries and, on the basis of currently available information, the Australian economy has not experienced the sort of large contraction seen elsewhere."

Then on Wednesday the figures the government has been dreading were released. The December quarter growth (GDP) figures showed the economy contracted by 0.5%. This is the first period of negative growth since Dec 2000. The ABS figures also showed that the end of year figures (0.3%) were the lowest since 1990.
Interesting the manufacturing sector contracted by 4.7% and the TCF by 8.5%. On the positive side the agricultural sector expanded production by 10%.


Finally today (Mon 9/3) the World Bank has released a report stating that the volume of world trade will decline for the first time since 1982. Secondly in a report the bank has prepared for next weeks G20 meeting the World Bank states that the world economy will shrink for the first time in 60 years. They have advised developing nations to monitor their banking sectors and to stay away from protectionsim which in their view will 'deepen the crisis'.
Interestingly they te World Bank also suggest that governments like Australia should "create a "vulnerability fund" and to set aside a fraction of what they spend on stimulating their own economies to help others.
After all that dastardly news the positive spin is whilst most of the major OECD nations are officially in recession Australia has the lowest negative growth.