The parts of the world that have been in trouble still are. They include Japan (with the world’s highest debt as a share of gross domestic product), the European Union and the United States; totalling 45 per cent of world GDP in 2012.
None have enthused their own citizens, or the rest of the world. And elections in 2012 did not point to a new mandate that would put any of them on the path to a bright future. France is already realising that its new president, Francois Hollande, cannot deliver what he promised, which the rest of the world had known at the time.
The US is still in a stalemate with the Republicans controlling the House and the Democrats having the presidency and the Senate. And Japan is still largely directionless.
However, even if this cluster of nations doesn’t grow in 2013 (but they will, for the most part, given “quantitative easing” and deficit spending) the rest of the world will ensure a global GDP growth of more than 3 per cent.
The Economist magazine’s predictions in November were for the world’s 20 largest economies to account for more than three-quarters (77 per cent) of global GDP. The new world of Asia, Brazil and Russia sit at one end of the table, the GFC nations at the other. In Australia, we talk about a two-speed economy: it is true also for the world’s other nations.
The estimate of global growth of the 230 nations for 2013 is just over 3 per cent for a population growing at 1.3 per cent, so the world’s standard of living is still rising. The dire predictions of a world depression after 2009-10 have not transpired and it is hard even to see another recession this side of 2018.
But we can be in no doubt that the baton of world economic power, if not yet political or military power, is being handed to Asia as the US, the EU and Japan muddle through this decade. It is almost as if yesterday’s power base is fading out with a whimper. The late 19th and early 20th centuries had been the British Empire’s, with most of the 20th century and a decade or two of the 21st century being America’s.
It is symbolised by the fact that China is expected to pass the US in GDP in 2016. And Asia (the Asia-Pacific region plus the Indian subcontinent) is expected to pass the whole of North America and the EU a year later in 2017. That is a decade and a half earlier than most predicted at the end of the 20th century.
Australia is now largely integrated into this Asian Century. More than two-thirds of our trade, tourism and immigration are within this mega-region. And our prospects for 2013 (and beyond) look OK, as the chart forecasts.
Calendar year growth is expected to come in just below 3 per cent as part of the cyclical pattern in each 8½ year-long business cycle; this cycle is not due to finish until 2018. But 2013, being a federal election year, will make it lively in other ways.
And, yes, some of the nation’s 19 industry divisions will have little growth, including manufacturing and hospitality. Some will be grappling with game-changing technology, such as online shopping in the retail industry and robotics in the mining industry.
But it was always thus: the spectrum of growth ranges from negative or negligible to more than 5 per cent in any year. Interestingly that does not necessarily convert directly to losses or sinful profits across the spectrum. Well-managed companies can match world best practice in almost any industry in any year. So, good managing and good luck in the new year.