Global Imbalances:

1
Global Imbalances

• How much adjustment will we see?

In The Zone Conference University of Western
Australia 9 November 2009 David Gruen Executive
Director, Macroeconomic Group
2
Global Imbalances

• Implicated in the global financial crisis
• Desirable that they become much smaller

3
Current Account BalancesPer cent of world GDP
Source IMF WEO Database, Treasury.
4
Global Imbalances

• Can examine from the perspective of trade
  imbalances (exports and imports) and net foreign
  income flows
• Or national saving and investment a more
  fundamental perspective

5
Savings and Investment ChinaPer cent of GDP
Source CEIC China Database, IMF WEO Database,
Treasury.
6
Savings and Investment Other East AsiaPer cent
of GDP
Note Excludes Taiwan and Vietnam due to data
limitations. Source IMF WEO Database, Treasury,
World Development Indicators.
7
Capital Flows into Developing AsiaPer cent of GDP
Source IMF WEO Database.
8
Savings and Investment USPer cent of GDP
Source IMF WEO Database.
9
Savings and Investment Australia Per cent of
GDP
Source ABS 5206.0, ABS 5302.0, Treasury.
10
Household ConsumptionPer cent of GDP
Source Australian Bureau of Statistics, Bureau
of Economic Analysis, CEIC China Database.
11
Household ConsumptionPer cent of GDP
Per cent
Per cent
75
75
70
70
US
65
65
Australia
60
60
55
55
50
50
45
45
40
40
35
35
Sep-79
Sep-82
Sep-85
Sep-88
Sep-91
Sep-94
Sep-97
Sep-00
Sep-03
Sep-06
Sep-09
Source Australian Bureau of Statistics, Bureau
of Economic Analysis, CEIC China Database.
12
Household ConsumptionPer cent of GDP
Source Australian Bureau of Statistics, Bureau
of Economic Analysis, CEIC China Database.
13
Real Effective Exchange Rates2005 100, monthly
Source Bank of International Settlements.
14
Global Imbalances Conclusions

• Current forecasts suggest imbalances will become
  somewhat smaller
• Further adjustment will require
• a sustained rise in US national saving
• a sustained rise in domestically sourced growth
  in Asia
• further adjustment of real exchange rates