Where will the global political hotspots be in 2018? (Spoiler alert: it’s not all about Donald Trump)



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With so many global flashpoints, and so little diplomacy, 2018 could be a turbulent year.
AAP/The Conversation

Tony Walker, La Trobe University

Writing for Foreign Policy, Robert Malley, the newly appointed head of the International Crisis Group, makes a good point when discussing global challenges in 2018:

It is not all about Donald Trump.

To be sure, an erratic American presidency contributes to unsteadiness around the globe. American global leadership is now contested as never before since the Allies triumphed in the second world war.

Even in the depths of a Cold War marked by various crises – including the Berlin Blockade, an ill-starred military adventure in Vietnam, and the Cuban Missile Crisis – American leadership would still assert itself.

Let’s not forget American post-second-world-war diplomacy spawned international institutions like the World Bank and International Monetary Fund, the General Agreement on Tariffs and Trade, the United Nations and NATO. In Australia’s case, it also gave birth to the ANZUS Treaty, initialled in 1951.

… although it is a little bit about Donald Trump.
Reuters/Jonathan Ernst

There was hardly any component of post-war global architecture that did not involve Washington in a leading role.

ANZUS, and with it the American alliance, remains the cornerstone of Australia’s security arrangements – notwithstanding a frequent misinterpretation of the treaty as a security guarantee as opposed to an agreement to consult in the event of either party’s security being threatened.

In essence, America is godfather of post-war multilateralism. An American-led consensus on how best to manage its global responsibilities is now in danger of unravelling, buffeted by domestic “America First” disagreements at home and a contested security environment abroad.

Australia’s place in the world

From an Australian perspective, it is all about a shifting power balance in the Indo-Pacific.

This might be described as the pre-eminent challenge in the year(s) ahead, as Australia navigates between the idiosyncracies of a Trump White House and its successors. Then there is the relentless Chinese push to spread its power and influence.

Above all in the foreign policy sphere, Australian policymakers are faced with the task of expanding Canberra’s foreign and security policy room for manoeuvre between its security guarantor and principal trading partner, without endangering the alliance relationship itself.

China, led by Xi Jinping, will continue to push to spread its power and influence.
Reuters

This will require a sophistication that has not always been apparent among policymakers. Their instinct has been to cling to the alliance like a life raft and, on occasions, discreditably, use it as a wedge issue against political opponents.

China’s rise is encouraging a more realistic view of Australia’s geopolitical circumstances, and none too soon.

The following extracts from Australia’s Foreign Policy White Paper, released in November, provide a flavour of that greater realism:

Navigating the decade ahead will be hard because as China’s power grows our region is changing in ways without precedent in Australia’s modern history.

And:

Powerful drivers are converging in a way that is reshaping the international order and challenging Australia’s interests. The United States has been the dominant power in our region throughout Australia’s post-second-world-war history. Today, China is challenging America’s position.

And:

The government recognises there is great debate and uncertainty in the United States about the costs and benefits of its leadership of the international system.

And:

In the decades ahead we expect further contestation [between the US and China] over ideas and influence, directly affecting Australia. It is imperative that Australia prepare for the long term.

All of this exposes Australia’s biggest challenge in the next several decades. Simply put, this is to build its own self-reliance, including smart investments in defence capabilities, along with nurturing security relationships in its own region.

Most desirable in all of this would be to involve – not exclude – China in building a regional security architecture. This could possibly be along the lines of the Helsinki Accords, which helped stabilise Europe during a long stand-off with the former Soviet Union.

Australian officials might want to expand a quadrilateral Indo-Pacific security partnership – involving the US, Japan, Australia and India – envisaged as a hedge against China to others, including China itself.

Creative regional diplomacy of the sort that brought about the establishment of the Australia Pacific Economic Co-operation (APEC) forum would seem to be required.

Closer to home

This is the big global challenge for Australia in 2018 and beyond. Now to what might be described as “localised” challenges.

We’ll restrict that number to five, including:

  • North Korea’s nuclear ambitions;

  • the Middle East more generally, and potential conflict with Iran in particular;

  • the Rohingya crisis and pressures that is exerting on Myanmar and surrounding countries. Alongside this is the “identity politics” across Asia, in which minorities (like the Rohingya) are threatened;

  • Afghanistan, in which Australian forces are still involved in a training capacity; and

  • threats of cyber-terrorism: what Ian Bremmer and Cliff Kupchan of the Eurasia Group describe as a “global tech cold war”.

At the top of the regional challenges is North Korea, led by Kim Jong-un.
Reuters/KCNA

Top of this list is North Korea, where the risk of overreach and accident with terrible consequences is real. As Malley puts it in his Foreign Policy paper:

Without a viable diplomatic offramp, Washington risks cornering itself into military action. Even a precisely targeted attack would likely provoke a North Korean response.

From Australia’s perspective, and given that the bulk of its trade goes to the countries of North Asia (China, Japan and South Korea), conflict on the Korean Peninsula would be crippling.

Second on my list, as it is on Malley’s, involves the risks of open conflict between Iran and Saudi Arabia, egged on by the US and Israel. Such disruption could not be contained. It would spread, risking oil shipments from the region and wider conflict between Sunni and Shia.

As Malley puts it:

With so many flashpoints, and so little diplomacy, the risk of an escalatory cycle is great.

From an Australian perspective, an escalation would be alarming, given the deployment of our forces in a training capacity in Iraq.

Third is Afghanistan, where the tempo of US-led strikes against the Taliban is set to increase, along with pressure on Pakistan to desist in its covert support for the insurgency.

Malley recommends:

US allies in Afghanistan should push for a greater diplomatic political component to the US strategy. As it stands, that strategy sets the stage for more violence while closing avenues for de-escalation.

With troops in the field in a training capacity, the Australian government should be pushing for a regional settlement, involving Afghanistan’s neighbours and the insurgents.

Rohingya refugees continue to flee from Myanmar to neighbouring Bangladesh.
Reuters/Tyrone Siu

Fourth on my list is the issue of identity policy in southern Asia, including the displacement of the Rohingya to neighbouring Bangladesh.

As Bremmer and Kupchan put it:

Identity politics in southern Asia comes in several forms: Islamism, anti-China and anti-other minority sentiment, and intensifying nationalism in India.

From Australia’s perspective, displacement and persecution of minorities in its neighbourhood is a particularly worrying development, along with Islamic State-inspired eruptions in countries like the Philippines.

Finally, looms the issue of cyber conflict.

The biggest fight over economic power centres on the development of new information technologies. Competition for dominance in the areas of artificial intelligence and super-computing between the US and China has serious implications for Australia’s national security.

The cyber issue, which potentially includes the weaponisation of AI, is becoming the new contested space.

And that’s not all …

Now, to a less concerning issue, for the moment: the global economy.

In its latest overview, the World Bank expects global growth to edge up to 3.1% “after a much stronger-than-expected 2017, as the recovery in investment, manufacturing and trade continues, and as commodity-exporting developing economies benefit from firming commodity prices”.

As one of the world’s biggest commodity exporters, this is good news for Australia. The World Bank says:

2018 is on track to be the first year since the financial crisis that the global economy will be operating at or near full capacity.

However, it also warns of a slowdown in potential growth as stimulatory fiscal and monetary policies run their course.

The ConversationWelcome to 2018.

Tony Walker, Adjunct Professor, School of Communications, La Trobe University

This article was originally published on The Conversation. Read the original article.

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Will elections in 2018 see 2017’s left-wing revival continue?



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NZ Labour had been polling in the mid-20s before Jacinda Ardern became its leader and eventually won the 2017 election.
AAP/Mick Tsikas

Adrian Beaumont, University of Melbourne

In 2018 there will be elections in the Australian states of Victoria, South Australia and Tasmania, as well as in Italy, the US and Mexico.

Essential has released polling for the five mainland Australian states, conducted from October to December. Figures are given by month for the three eastern seaboard states.

In South Australia, Labor led 51-49 in October to December, a one-point gain for the Liberals since July to September. Primary votes were 34% Labor (down three), 31% Liberals (up one), 22% for Nick Xenophon’s SA-BEST (up four) and 8% Greens (up two). The South Australian election will be held on March 17.

Newspoll had SA-BEST at 32% from polling conducted in the same period as Essential. Essential is assuming SA-BEST preferences flow to the Liberals at a 60-40 rate, but at the 2016 federal election, these preferences flowed to Labor at a 60-40 rate. Essential’s justification is that the Liberals have lost far more primary votes than Labor since the 2014 state election.

In Victoria, the Coalition led 51-49 in December, a two-point gain for the Coalition since November. Primary votes were 46% Coalition (up three), 37% Labor (steady) and 9% Greens (down one). For the October to December period, Labor was just ahead, 51-49. The Victorian election will be held November 24.

The Age commissioned ReachTEL polls of the Labor-held Victorian seats of Tarneit and Cranbourne on January 5. On the primary votes, there is a substantial anti-Labor swing in Tarneit, but little swing in Cranbourne.

There were many questions in the ReachTEL polls on youth crime. About two-thirds in both seats said the main youth crime issue was African gangs, and more than 55% said they were less likely to go out at night. A positive for Labor was that Premier Daniel Andrews had a large lead over Opposition Leader Matthew Guy on dealing with crime.

In the New South Wales Essential poll, Labor led 52-48 in December, a three-point gain for Labor since November. Primary votes were 40% Coalition (down three), 40% Labor (up three) and 9% Greens (steady). For October to December, Labor led 51-49.

I believe this is the first time Labor has led in a NSW state poll since shortly after the 2007 state election. The next NSW election will be held in March 2019.

In Queensland, Labor led 55-45 in December, a four-point gain for Labor since the November election. In Western Australia, Labor led 57-43 in October to December, a three-point gain for Labor since July to September.

The Tasmanian election is likely to be held in March, and it appears Labor is ahead under its popular leader Rebecca White.

The Italian election will be held on March 4. 37% of seats in both chambers of the parliament will be elected using first-past-the-post voting, while the rest use proportional representation.

Polling gives the right-wing coalition about 37%, the left-wing coalition about 27%, and the left-wing populist Five Star Movement about 28%. As the left is more split than the right, the right will have an advantage in the first-past-the-post seats, though it will probably be short of an overall majority.

The Mexican election will be held on July 1. The president is elected by first-past-the-post, and the left-wing candidate, Andrés Manuel López Obrador, is currently ahead. By antagonising Mexicans, US President Donald Trump could cause the election of a left-winger who would strongly oppose the proposed border wall.

The FiveThirtyEight poll aggregate currently gives Democrats a 11-point lead over Republicans in the race for the US Congress. Midterm elections will be held in early November, in which all 435 House of Representatives members and one-third of the 100 Senators are up for election. The Senate seats up this year went to Democrats by 25-8 in 2012, and a few Democrats will be defending states Trump won easily in 2016.

Even though Republicans only have a 51-49 Senate majority, the House of Representatives is more likely to switch party control than the Senate.

Left-wing parties performed better than expected in 2017 elections

In 2016, Trump was elected US president, and the UK voted to leave the European Union. Trump and Brexit were triumphs for the populist right, and it was expected that the left would also struggle in 2017. However, in both Australian and overseas elections held in 2017, the left generally performed better than expected.

At the March 2017 Western Australian election, Labor won a landslide, with 41 of the 59 lower house seats.

At the November Queensland election, Labor won a majority, and One Nation won just one seat. There had been much speculation that One Nation would win many seats and hold the balance of power.

A year after Trump’s victory, US Democrats easily won the Virginia and New Jersey gubernatorial elections. In the Alabama Senate byelection, Democrat Doug Jones defeated Republican Roy Moore by a 50.0-48.3 margin, overturning Trump’s 62-34 Alabama margin over Hillary Clinton in 2016.

Jones was sworn in as a US senator on January 3, replacing Luther Strange, who had been appointed by the Alabama governor after Jeff Sessions resigned to become attorney-general. Republicans now have a 51-49 majority in the US Senate, down from 52-48.

In an April article published after Theresa May called the June 8 UK general election, I said a Conservative landslide was likely – a widely held view. Under Jeremy Corbyn, Labour’s vote instead increased almost ten points from 2015, and the Conservatives failed to win a majority – though they clung to power with support from Northern Ireland’s Democratic Unionist Party.

In the May French presidential election run-off, Emmanuel Macron crushed Marine Le Pen 66-34. While Macron is a centrist and not a left-winger, he is clearly preferable to a conservative or Le Pen from a left perspective.

In October, Labour won the New Zealand election (which was held in September) after securing a coalition agreement with NZ First. Labour had been polling in the mid-20s before Jacinda Ardern became its leader in August.

While 2017 was generally a good year for the left, there were two poor results. At the October Austrian election, a conservative/far-right government was formed after more than a decade of coalition governments between the major left and right-wing parties.

At the German election in September, the far-right achieved its highest vote share since the second world war (12.6%). The major parties had formed a grand coalition, and both slumped, with the Social Democrats falling to their lowest vote (20.5%) since 1932. Despite this terrible result, it appears likely there will be another grand coalition government led by Angela Merkel.

Where there has been a clear difference between the major left and right-wing parties (the UK, the US and New Zealand), the left-wing party has performed strongly. The dismal results for the left in Germany and Austria have occurred in left/right coalitions, where there was perceived to be little difference between the left and right.

Furthermore, embracing a left-wing agenda neutralises some of the far-right’s appeal. The UK Independence Party won just 1.8% of the vote at the 2017 election, down almost 11 points from 2015, though some of this fall was caused by the Conservatives’ support for Brexit. Macron vigorously attacked Le Pen’s policies, and thrashed her by a bigger than expected margin.

The ConversationThe far-right tends to perform best when voters perceive little difference between the major left- and right-wing parties.

Adrian Beaumont, Honorary Associate, School of Mathematics and Statistics, University of Melbourne

This article was originally published on The Conversation. Read the original article.

What we can expect from China’s economy in 2018



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This year the Chinese Communist Party will tackle some of it’s biggest economic hurdles.
AAP

Alice de Jonge, Monash University

In 2017, we saw the consolidation of China’s power and influence globally, and of Communist Party leader Xi Jinping’s power nationally. This year, the party will try to use this to tackle some of its biggest economic hurdles such as financial risk, environmental pollution and maintaining social cohesion.

A first and overriding priority will be managing and preventing major financial risks within the Chinese economy. China will continue to clean up and tighten controls over its financial sector.

Beijing has already banned risk-laden Bitcoin from its financial system, and the government says it will maintain a “proactive fiscal policy and prudent monetary policy” for 2018.

This is in line with moves earlier in 2017 to curb credit growth and consolidate the country’s 100 trillion yuan (US$15 trillion) financial services asset-management industry under a single regulatory umbrella.

Regulators have also issued a 36-point code of conduct for the country’s private enterprises to follow when investing overseas. This is part of a move to clip the wings of China’s most aggressive global deal makers, firms like HNA Group and Fosun International. These businesses responded enthusiastically to the government’s “going out” policy to link China to the rest of the global economy, launched at the beginning of the century.

On the one hand, China has banned investments in gambling and “sensitive” industries and restricted investments in property, hotel, film and sports. But projects linked to China’s ambitious Belt and Road initiative are actively encouraged. So 2018 should see a continuation of China’s expanding economic influence globally through infrastructure and other major projects.

Beijing’s agenda is clear and the message from the centre is tightly controlled.
How Hwee Young/AAP

Tackling pollution, of all kinds

In line with the party’s focus on stability and risk minimisation is a clear determination to move away from high-speed growth to high-quality growth. “Quality” here means an economy that is cleaner and more user friendly.

The government is trying to reduce pollution. Measures to close down polluting factories and make local officials more accountable for environmental damage are starting to make a difference.

A major component of the shift to a cleaner economy is China’s determination to free itself from any reliance upon carbon imports.
This has potentially major implications for the Australian economy, which has done so well over the past few decades largely because of its commodity exports to China.

China is also no longer willing to accept imports of Australian waste, leaving Australia with the question of how else to deal with its accumulating stockpiles.


Read more: China’s Xi sets his sights on the world


Social stability for economic and political stability

In an unusual move during last year’s annual end-of-year economic convention, the government detailed concerns from the wider public on issues such as online scams, sex discrimination in the workplace and a lack of kindergarten services in certain regions. This reflects the party’s concern with social cohesion.

Maintaining a harmonious society has long been a concern of China’s leaders. In 2018, the anti-poverty campaign – one of Xi Jinping’s pet projects – will accelerate, with millions of rural poor being relocated to new housing with water and power. This will not only boost GDP and economic growth figures, it’s also aimed at promoting support for the party and its leaders.

Chinese leadership’s emphasis on social harmony extends to supporting the party in its policy endeavours. A series of recent measures have been aimed at strengthening party organisations in business and civil society organisations.

In line with existing provisions in China’s Company Law, these measures seek to ensure that all organisations in China (local and foreign, commercial and non-profit) make room within the organisation for the operations of a Communist Party cell. This allows the party to monitor and influence the operations of any organisation.


Read more: Why China is cracking down on overseas investment


The rolling out of a social credit system is also aimed at monitoring and influencing the behaviour of both organisations and individuals. It operates by awarding social credit points for good social behaviour, whether it be corporate philanthropy or an individual picking up rubbish on the kerbside. It also deducts points for bad behaviour, such as traffic law violations, failing to pay bills on time or domestic violence. There are even “blacklists” for the worst offenders.

Beijing’s agenda is clear and the message from the centre is tightly controlled. But the messiness and the unknowns will lie in its local implementation.

China has always struggled, and always will struggle, with the question of how to balance direction from a central government with local implementation for local circumstances.

For example, a recent decree requiring all local areas to move away from coal fired heating, towards natural gas, hit a snag when thousands of houses and schools were left without heating in freezing conditions in northern China. It forced authorities to back-track on implementing the policy.

The key for the government will be to strike a balance between reform and preserving stability. Aggressive reforms will be duly countered by other policies if they are seen as posing risks to economic stability.

The ConversationIf successful, China’s reforms will allow its economy to take the lead in adapting to a dynamic world. But the sheer size of its ambitions (both global and local) also contains the risk that failures, if they occur, could have devastating impacts.

Alice de Jonge, Senior Lecturer, International Law; Asian Business Law, Monash University

This article was originally published on The Conversation. Read the original article.

Turnbull has politicked himself into irrelevance on energy and climate in 2018



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Marcella Cheng/The Conversation

Alan Pears, RMIT University

As we approach the end of the year, it’s useful to look back and forward. Now is an auspicious time, as two major energy-related reports have been released this week: the federal government’s review of their climate change policies, and a discussion paper from the Australian Energy Market Operator (AEMO) on future energy paths.

The difference between the two is striking. The AEMO paper is practical, direct and realistic. On the other hand, the climate policy review relies essentially on Australia buying lots of international carbon permits to meet our Paris target (and, implicitly, on state governments taking up the challenge their Canberra colleagues have largely abanondoned).

It’s amusing to read a document that plays with numbers in such creative ways. But it is a fairy story, and it’s no way to drive national climate policy.


Read more: The federal Climate Policy Review: a recipe for business as usual


I almost feel as though I could just change the dates and reprint my article reviewing prospects for energy in 2017:

2017 is the year when many long-festering energy policy problems must be addressed. Our outdated energy market model is falling apart. The gas industry is lining its pockets at the expense of Australian industry. Climate policy is urgent, but controversial among key decision-makers. Our fossil fuel exports are under threat from global forces.

But things have in fact shifted a long way – the revolution is accelerating and unstoppable. The federal government is almost irrelevant; the public statements and policies it presents are simply aimed at getting “something” through the Coalition party room, or trying to throw blame on others. It’s very sad.

The real games are being played out within state governments; in battles between energy policy agencies and regulators; by emerging industry players who do not even have formal roles in energy legisation; and by business and the community as they defend themselves from the failures around them by implementing “behind the meter” solutions and working together.

The real heavy lifters

Medals of Valour should be awarded to Chief Scientist Alan Finkel, AEMO chief executive Audrey Zibelman, and South Australian Premier Jay Weatherill.

The government’s response to this year’s Finkel Review showed that no amount of compromise would allow a sensible energy and climate policy to pass through the minefield of the Coalition party room. Prime Minister Malcolm Turnbull and Environment and Energy Minister Josh Frydenberg, both of whom know what they need to do, simply have too little political capital within that place to drive realistic energy policy.

But the Finkel Review also successfully recommended many changes that will help to fix the physical operation of the grid. Innovation and the laws of physics have finally begun to triumph over market politics and ideology.


Read more: The Finkel Review at a glance


AEMO worked out a way to get around the glacial and obstructive tactics of the Australian Energy Market Commission on demand-side action by setting up a “pilot project” to drive demand response. It has been clear for decades that this is a very cost-effective tool. Zibelman has been a voice of practical reality and clear understanding of the future of energy, including the demand side, and AEMO’s future energy paths reflects that.

Weatherill has weathered a storm of abuse over his state’s innovative energy strategy. His government has shown how a diversified approach can transform an energy system in little more than a year. But he needs to put more effort into long term energy efficiency and energy productivity improvement measures integrated with renewables and storage, to reduce pressure on electricity systems over time. For example, home cooling comprises a third of South Australia’s peak electricity demand, but could be slashed by efficient buildings and cooling equipment.

What lies ahead

Looking forward, the coming year will be shaped by some key issues, some of which are already playing out at a frenetic pace. Consider a small sample of many recent events:

  • As mentioned, AEMO has released a discussion paper framing a very different electricity future, and including a low-carbon scenario.

  • The new battery in South Australia has delivered remarkable outcomes, helping to stabilise the grid in ways that few imagined.


Read more: Yes, SA’s battery is a massive battery, but it can do much more besides


  • The Victorian Essential Services Commission has proposed a new “time of day” feed-in price for rooftop solar that reaches 29 cents per kilowatt-hour in afternoons and evenings. If approved, this will be a game-changer, as adding battery storage to rooftop solar will become far more attractive.

  • The Energy Networks Association, not the gas industry, has released a zero emission gas strategy at last.

  • The annual report on the National Energy Productivity Plan (remember that?) shows we’re falling behind even the government’s weak target: not surprising given the miniscule resources allocated.

Meanwhile the federal government has released energy modelling to underpin ongoing negotiation on the National Energy Guarantee (NEG) that is simply irrelevant and embarrassing. The Energy Security Board’s involvement in this has undermined perceptions of its independence, especially when it is contrasted with the vision AEMO is discussing in its paper.

While the states have agreed to continue discussion on the NEG in April, there are some major hurdles. Primarily, states must be allowed to set and achieve their own energy targets: the federal energy minister has put the blame for problems on the states, and they now have to be seen by their voters to act.

Second, the design must ensure it does not give the dominant energy companies even more power to distort markets. Some members of the Energy Security Board seem to understand the challenges, and are optimistic they can be overcome. Time will tell.

The ConversationAs Turnbull has said, we live in exciting times.

Alan Pears, Senior Industry Fellow, RMIT University

This article was originally published on The Conversation. Read the original article.

Vital Signs: Australia heads into 2018 with mixed economic signals



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It’s hard to get a fix on where Australia’s economy is headed.
Garry Knight/Flickr, CC BY

Richard Holden, UNSW

Vital Signs is a weekly economic wrap from UNSW economics professor and Harvard PhD Richard Holden (@profholden). Vital Signs aims to contextualise weekly economic events and cut through the noise of the data affecting global economies.

This week: the housing market is still cooling, but not disastrously so, consumers remain optimistic, but business is cautious, and all eyes will soon turn to Christmas retail sales.


Since housing is the main thing that Australians seem to talk about (even when the Ashes is on), let’s start with that.

The ABS residential house price index for the September quarter showed a small decline Australia wide, with prices falling 0.2%. Sydney prices were down 1.4%, while Melbourne was still up 1.1%.

This was, as we are now used to, met with press commentary about how the housing boom is well-and-truly over, and with various other shrieks of angst. Really? Melbourne just didn’t grow as fast is it did before. And Sydney, though down 1.4% on the quarter, is still up a whopping 9.4% over the past 12 months.


Read more: Four ways an Australian housing bubble could burst


On one level, the reaction makes no sense at all. On another, as I wrote in a previous column, the implications of even modest falls could be large, given how residential lending is structured. If Australia’s banks are lending people a massive chunk of their disposable income, marking-to-market on a regular basis and issuing a lot of interest-only loans, then even small falls can have big effects on household spending and even defaults. And. They. Are.

The Westpac consumer sentiment index came in stronger than expected, rising 3.6% in December to 103.3 points (recall 100 in these indices is the breakeven between optimists and pessimists). Westpac’s chief economist Bill Evans said:

This is a surprisingly strong result and confirms the lift we have seen in the index over the last three months.

This contrasted with the news on business confidence. The NAB Monthly Business Survey business conditions index dropped 9 points. This still left it at +12, however, which is above the long-run average of +5 index points. Moreover, it appeared that some of the business concern was about wages edging higher, which would be a good thing for workers and the economy more generally.

As I have said in Vital Signs many times, sluggish wage growth has been a persistent problem among advanced economies, and Australia is no exception. Even early signs of an increase bode well for the economy more broadly – and business will ultimately benefit from that. But these are very early signs.

Unemployment in Australia remained stubbornly high at 5.4% in November. A large 61,600 jobs were created, but the labour force participation rate rose to 65.5%, leaving the overall unemployment rate unchanged. It will be important to see in coming months if that pace of job creation can be maintained – for that is a prerequisite for a genuine drop in unemployment.


Read more: Vital Signs: economics can’t explain why unemployment and inflation are both low


Thursday morning Australian time, the US Federal Reserve raised interest rates for the third time this year, bringing the target Fed Funds Rate to the 1.25-1.50% band.

The Fed also suggested in its statement that we can expect further, gradual rises, in 2018, saying:

The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.

Most market participants interpret this as meaning we can expected three 25 basis point hikes next year.

As has been the case for some time now, the recovery in the US looks to be self-sustaining and robust. In Australia, we continue to see very mixed signals across different aspects of the economic map.

The housing market looms as a huge potential problem, with regulators only taking action relatively recently to begin to rein in the extravagant lending of a decade or more. And pretty modest action at that.

The ConversationThe next major thing to watch for in Australia is the all-important holiday season retail sales figures. And, as ever, the housing market.

Richard Holden, Professor of Economics and PLuS Alliance Fellow, UNSW

This article was originally published on The Conversation. Read the original article.