The second Global Financial Crisis (GFC)

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NIEIR’s base case takes the view that any inflationary pressures that may well intensify over the next eighteen months, including from a Republican Government in the United States increasing tariffs again and the impact of immigration outflows. However, these pressures will be ended in 2026 from a world recession from interest rate rises caused by a meltdown in United States bond markets, thus forcing a 2nd GFC.


The cause of the 1st GFC in 2008-09 was instability in United States housing markets. The cause of the 2nd GFC will be the inability of the United States to control its Federal public sector deficit, which is currently at 7 per cent of Gross Domestic Product (GDP). The Congressional Budget Office (CBO), responsible for monitoring the deficit projects the deficit to remain stable to the early 2030s. However, this is based on implausibly optimistic assumptions.


World GDP growth is predicted at a reasonable 3.0 per cent for 2025, 0.5 per cent for 2026 and a weak 1.6 per cent for the following year. In 2028 there is a recovery to 2.2 per cent. However, the scaring of the 2nd GFC restricts world GDP growth to an average of 2.3 per cent per annum for the balance of the period to 2040. This is low compared to the historical record, in part because of the low growth prospects for the United States as its deficit comes under, and is held under, control. For Australia GDP growth is 2.0 per cent for 2024-25 and 2.3 for 2025-26, in part due to lower interest rates early in the year. In 2026-26 growth is zero and 2.0 per cent for the following fiscal year. For the 2026-2027 period the Australian unemployment rate is 5.5 per cent and then drifting up to the 6.0 per cent mark due to the relatively poor prospects for the world economy.


These projections were made before the result of the United States election was known and took the view that a 2nd GFC was likely on the balance of probabilities irrespective of who won the election. This is because the fiscal settings of the United States Federal Government are dire given the relatively small fiscal footprint of the Government relative to the deficit. The maintenance of short-term inflationary pressures, by requiring interest rates to be higher for longer, will be a contributing factor to the early timing of the 2nd GFC because it will increase the short-term projections of the United States deficit. The election of Donald Trump has increased the probability of occurrence and, in all likelihood, its intensity.

Download the supplement report here (PDF)

State of the Regions Report 2022-2023: Industries, trade & occupations in uncertain times

Unlock critical insights with this comprehensive report, analysing industry trends, trade flows, and shifts in wealth and occupation patterns across Australia, the US, and beyond—including impacts from the post-COVID period  and the United States political-economy and Australia to 2040.

With over 30 years of economic research, it’s an indispensable tool for government bodies, businesses, and policymakers adapting to today’s challenges. This report provides data-driven analysis for strategic, impactful decisions, highlighting growth opportunities and navigating regional challenges with detailed, actionable insights shaped by both resilience and recovery.

Download our free main report from sor.nieir.com.au

State of the Regions 1994 to 2019

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A land boom, a mining boom and their aftermath

Beginning in 1996, NIEIR’s State of the Regions reports have documented the economic progress of Australia’s regions, both urban and country. Issued annually, each report has covered the current year and the immediate past. The reports chronicle a period of relatively stable growth, at national level, in the major economic indicators including Gross Domestic Product and National Income. Growth in these indicators was driven by growth at the regional level, with stability at the national level achieved by balancing out the fate of the various regions, some of which prospered and some of which fell behind.

This quarter century of sustained growth ended with the advent of COVID-19 in 2020. Whether or not it can be resumed post COVID-19, it is opportune to assess regional economic performance over this period of sustained growth, as covered in the State of the Regions reports. Rather than provide a summary of the annual reports, this overview report goes back to the original statistics and assesses the period as a whole. For statistical purposes, the period begins with the recovery from the 1990 recession (most of the comparisons begin with the 1993-94 financial year) and ends with the 2018-19 financial year.

This report divides Australia into 67 regions, each with precise geographically boundaries. Each region is considered from two points of view: as a region in which production takes place and as a region in which income is received. The first point of view concentrates on the location of economic activity – activity organised by employers (including the self employed) and generating paid work. The second point of view highlights where people live, mainly in household dwellings but also in various kinds of more-or-less permanent institutional accommodation.

The first point of view concentrates on the value of production in each region (on a production or workplace basis) while the second centres on incomes received (on a residential or household basis). The basic statistical framework is provided by the National Accounts, which the ABS prepares at national and state/territory level. The State of the Regions reports extend this framework to the regional level on both a production basis and a residential basis.

 

Download the report

 

Fast Train Project Macro Economic Assessment July 2020

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STRONGER, TOGETHER – An independent state-wide macroeconomic assessment of fast regional commuter rail network impacts on Victorian settlement patterns, economic growth, fairness and opportunity.

With a population approaching five million, the Melbourne metropolitan area accommodates around three-quarters of the population of Victoria. Five railway lines radiate from Melbourne towards a mixture of major provincial cities, towns, ex-urban areas and farmland.

In the first half-decade of the current century the government of Victoria upgraded the country portions of four of the five rail lines to clear one track for 160 kph running.

The current project proposal follows on and includes electrification of the five lines, a modest increase in maximum speed from 130/160 kph to 200 kph and further increases in frequency of service.

The present study is confined to addressing the effects of the Project on the productivity of the Victorian economy and its constituent regions via its influence on producers’ choices as to where to locate economic activity and citizens’ choices as to where to live. It accordingly assumes that the Project is viable in terms of patronage (and hence modal split), costs (including health and safety benefits) and environmental benefits including greenhouse gas emission abatement.

https://nieir.com.au/wp-content/uploads/2020/07/Fast Train Project Macro Economic Assessment July 2020.pdf

For comment, please contact:

Dr Ian Manning
0447 653 711