Speaker 1: Hello, and welcome to Sephonomics, the podcast that brings the
Speaker 1: global economy to you. So we've spoken before on this
Speaker 1: podcast about global supply chain bottlenecks, ships lined up at ports,
Speaker 1: where to get in, the soaring price of putting anything
Speaker 1: on a container ship, and you maybe thought it wouldn't
Speaker 1: affect you. But things got a lot more serious in
Speaker 1: the past week, and we realized even the tomato source
Speaker 1: on your pastor could be hit by supply shortages in
Speaker 1: the coming months. We have that chilling story from the
Speaker 1: tomato fields of Italy. In a few moments. We'll also
Speaker 1: here how COVID nineteen has turned Australia's attitude to immigration
Speaker 1: upside down from our economy reporter down under Michael Heath.
Speaker 1: But first, a rare treat a conversation I just had
Speaker 1: with one of the most respected economists in the world,
Speaker 1: professor of the International Financial System at Harvard's Kennedy School
Speaker 1: of Government and now the Chief Economist of the World Bank,
Speaker 1: Dr Carmen Reinhardt. Carmen, welcome to this session and I'm
Speaker 1: delighted to see you again. It's an interesting time for
Speaker 1: the global economy because we have this quite a lot
Speaker 1: of what you might call upside surprises certainly in the
Speaker 1: developed world, not just on the pace of vaccination in
Speaker 1: many countries, but also the strength of the recovery. And
Speaker 1: I see even in your in your latest report, you
Speaker 1: see your forecasting global growth this year the highest we've
Speaker 1: had after a recession for eighty years. So there's also
Speaker 1: good news there. But we are also conscious that the
Speaker 1: picture is not so bright in the developing world. So
Speaker 1: how would you characterize the picture and maybe what are
Speaker 1: the surprises that you would say relative to what you
Speaker 1: might have thought at the start of the year. So
Speaker 1: I think Stephanie, you you hit on the key, the
Speaker 1: key point without sending sounding cliche. I think that the
Speaker 1: issue of a K shaped recovery is is very much
Speaker 1: on point. The surprises in the advanced economies have been
Speaker 1: mostly on the upside, and the substantive resources in terms
Speaker 1: of both fiscal stimulus, monetary policy, and more broadly than
Speaker 1: just monetary policy, financial uh support and stimulus made the
Speaker 1: the faster than expected, faster than standard recovery, and the
Speaker 1: advanced economies the emerging markets for starters, let alone the
Speaker 1: poorest countries. The developing countries don't have those kinds of resources.
Speaker 1: So in every check mark that I may about the
Speaker 1: advanced economies, pretty much you can take off the check
Speaker 1: mark for for for many of the developing countries, many
Speaker 1: have had very limited, very limited share of the population
Speaker 1: is yet to be vaccinated. Fiscal space, which was already
Speaker 1: strained in many developing an emerging market countries before COVID,
Speaker 1: isn't there to provide you know, the big push, the
Speaker 1: big stimulus, the big transfers to households. And I'll conclude
Speaker 1: by saying that it isn't just about fiscal stimulus, monetary stimulus.
Speaker 1: For the first time in history, emerging markets during the
Speaker 1: crisis were able to do significant countercyclical monetary policy. However,
Speaker 1: that experience has already been cut short by very pronounced
Speaker 1: pickup and inflation. That divergence is critical to the outlook.
Speaker 1: So the question you post is is a very relevant one. Uh,
Speaker 1: you know, given the concerns that we're seeing about, you know,
Speaker 1: overheating in the US, the possibility the big question mark
Speaker 1: is the popping inflation, temporary or more lasting. And you know,
Speaker 1: for the emerging markets and developing world, they're very impacted
Speaker 1: by global conditions. The inflation we're seeing um certainly in
Speaker 1: the US, but we got we are seeing it globally.
Speaker 1: I think the core CPI globally is rising at its
Speaker 1: fastest place in in more than twenty five years. So
Speaker 1: how do you how do you view that? Do you
Speaker 1: think it's calls for fear or celebration given how much
Speaker 1: we struggle to get inflation rates up in many developed countries,
Speaker 1: So you know, I think for the celebration side, you
Speaker 1: immediately have to think of Japan, right, I mean, they
Speaker 1: they they've had decades first deflation and then undershooting. But
Speaker 1: before we celebrate too much, I think the question that
Speaker 1: remains to be sorted out is how much of this
Speaker 1: is a temporary blip and how much of it sticks.
Speaker 1: I think the concerns about sticking I would I would
Speaker 1: characterize as threefold. The first one is we don't know
Speaker 1: what the supply shocks, the lasting supply shocks. COVID has
Speaker 1: done and continues to create a lot of variation from
Speaker 1: the normal trade patterns and supply chains. Transport costs have
Speaker 1: been doing strange things. The second part, of course, is
Speaker 1: the monetary stimulus at the global level on the scale,
Speaker 1: and so those two factors supply side, the multiplier effects
Speaker 1: of the of the monetary easing, and the fact that
Speaker 1: it's a global shock. Two thousand two tho nine was
Speaker 1: not two thou two thousand nine was a crisis and
Speaker 1: about a dozen advanced economies, but not global. I think
Speaker 1: those three factors raised concerns that the the I'm not
Speaker 1: saying we're off to the races or anything like that,
Speaker 1: but that I think that the there are there is
Speaker 1: cause to be concerned that a it's more the inflation
Speaker 1: pickup has more of a lasting component than just transitory
Speaker 1: rebound slash overheating. But it's interesting you say concerned. I mean,
Speaker 1: as you said at the start, that's not just in Japan.
Speaker 1: Many central banks around the world have struggled to get
Speaker 1: to meet their inflation targets, actually to get up to
Speaker 1: their inflation targets, not least the European central by in
Speaker 1: the last few years. If we if we're moving from
Speaker 1: a world that we've had for ten or fifteen years,
Speaker 1: where the average inflation in the developed world has been
Speaker 1: saying one and we're moving to a world where it's
Speaker 1: more like two, two and a half even three um,
Speaker 1: is that is that really cause for concern, I mean,
Speaker 1: is your concern from the fact that you you think
Speaker 1: that we would struggle to control that because it would
Speaker 1: certainly give policy makers a bit more room for maneuver
Speaker 1: than they've had. Stephanie, if if what you describe is
Speaker 1: is the issue at hard, then indeed it wouldn't be
Speaker 1: a concern. But I think let's not flatter ourselves in
Speaker 1: terms of the what's how how precise lead can can
Speaker 1: central banks really hit the nail as as we highlighted,
Speaker 1: it's been undershooting for a decade and if it's nice,
Speaker 1: well behaved, very moderate, you know, drift upward, what's the
Speaker 1: what's the big deal? The bigger deal is that the
Speaker 1: the sufficiently big spike that lasts for sufficiently long would
Speaker 1: I think impact inflationary expectations in a in a way
Speaker 1: that you know, inflation expectations have been really anchored UH
Speaker 1: for very many many years now, and then you you
Speaker 1: you know, then you get into uh, perhaps inflation rates
Speaker 1: that are beyond those that are desired UH in the
Speaker 1: advanced economies. One of the things we're seeing with the
Speaker 1: pop and inflation, especially in many emerging markets but not exclusively,
Speaker 1: are big increases in food prices. Food prices account for
Speaker 1: the largest share of the CPI basket in the poorer
Speaker 1: countries and even much more so in the poorer households.
Speaker 1: That is a factor. The fact that it is regressive
Speaker 1: on top of a regressive shark like covid um is
Speaker 1: in and of its self a source of concern. I
Speaker 1: guess the other big change in the last couple of years,
Speaker 1: particularly associated with COVID, which maybe we can't quite decide
Speaker 1: is a good thing or a bad thing, or maybe
Speaker 1: is a good thing and a bad thing, is this
Speaker 1: very different attitude towards very large deficits and public borrowing
Speaker 1: in the developed world. We had seen obviously large deficits
Speaker 1: in the past, but there's been a there's been an
Speaker 1: embrace of very high deficit spending by developed economies that
Speaker 1: we've not seen in quite this way before. You know,
Speaker 1: would you say that is overall something we should applaud
Speaker 1: or be also concerned about? Well, it has elements of both.
Speaker 1: I mean, I am no fair of debt, but I
Speaker 1: was and have been more than a hundred percent on
Speaker 1: board on the need to during the COVID pandemic to
Speaker 1: go in there big. I mean, you know, the point
Speaker 1: that this was a kid to a war, and therefore
Speaker 1: you react with that kind of of of stimulus is important.
Speaker 1: Now does that mean that I think everything is very
Speaker 1: benign and we no longer need to worry about debt
Speaker 1: or or any uh possible delatarious effects. No, I don't
Speaker 1: think so. But the previous question you had on inflation also, uh,
Speaker 1: even though inflation is one way eroding debt, if it
Speaker 1: also is associated with rising interest rates, then the calculus
Speaker 1: that people have been accustomed to in this low for
Speaker 1: a very long environment changes. So so I I would not,
Speaker 1: you know, declare victory on the issue. And I had
Speaker 1: one I had one final question, which is, we obviously
Speaker 1: have had a lot of focus on the G seven.
Speaker 1: In the last week. There was much talk, including from
Speaker 1: the World Bank and the International Monetary Fund, about pushing
Speaker 1: for commitment from the international community to make sure that
Speaker 1: you had as many people vaccinated as possible in the
Speaker 1: developing world in everyone's interests. What we got instead of
Speaker 1: the fifty billion that the methics would be needed, we
Speaker 1: got somewhat less than a billion and committed, and we're
Speaker 1: potentially looking at a very low vaccination rate in the
Speaker 1: developing well by the end of the year. Was that
Speaker 1: a failure of leadership the G seven? Were you disappointed? Absolutely?
Speaker 1: It's disappointment not just in terms of the scale, but
Speaker 1: also speed is an issue here. We really are, you know,
Speaker 1: running a race against variants and virus variants and so on.
Speaker 1: That that the delay. For example, we were the World
Speaker 1: Bank supports very much the if advanced economies were to
Speaker 1: send surplus vaccine sooner rather than later. Again the issue
Speaker 1: of timing. So it's a step in the right direction,
Speaker 1: but I think given the scale of the problem, I
Speaker 1: think more and more rapidly, you know, needs to be done.
Speaker 1: Come and Ryan Hort, Vice President Chief Economists at the
Speaker 1: World Banck, thank you very much for joining us. Thank
Speaker 1: you for having me. Now, so the list of casualties
Speaker 1: in the great global supply chain snow that we can
Speaker 1: now add Italian tomatoes which are rotting in the fields,
Speaker 1: were told instead of making their way into tins of
Speaker 1: pasta source. Well, Italy economy reporter Alessandra Miliaccio is here
Speaker 1: to fill you in on this, let's face a deeply
Speaker 1: troubling story. Alessandra, how all these tomato who's rotting? Where
Speaker 1: are the tins right, that's exactly the issue. There are
Speaker 1: plenty of the tomatoes, their basic product, but you don't
Speaker 1: have the tins because the Chinese economy is absolutely booming,
Speaker 1: and what they need to make the tins um is
Speaker 1: these particular sheets of metal that are missing basically um there.
Speaker 1: The Italian producers are telling us that they're asking when
Speaker 1: the deliveries will come, and the deliries are not coming
Speaker 1: and there's no end in sight apparently to the problem.
Speaker 1: The companies, both Italian companies and foreign companies in India
Speaker 1: have said that they can't guarantee anything. And the issue
Speaker 1: is that this type of product needs to be can
Speaker 1: within thirty six hours after picking. So once you've lost
Speaker 1: the time, then you just have to leave them. And
Speaker 1: it's not like I was hoping, oh maybe I'll have
Speaker 1: cheap tomatoes in the market, but no, they will leave
Speaker 1: them in the fields because it's not economically convenient to
Speaker 1: you know, to actually send them to market. So that's
Speaker 1: the unfortunate problem and that, I mean, that's the heartbreaking bit.
Speaker 1: And it's it's five million tons of process tomatoes. I mean,
Speaker 1: it really is one of the biggest producers, right, that's right.
Speaker 1: Italy is the number two sometimes number three producer along
Speaker 1: with China, and the biggest producer is California with a
Speaker 1: ten million. But the thing is that California can also
Speaker 1: put them in Carton's. California can put them in tubes
Speaker 1: because California is not obsessive like US Italians about their tomatoes,
Speaker 1: and therefore they're all right with paste that they are
Speaker 1: right with other kinds of products that are not as fresh,
Speaker 1: that are differently made. Basically, see the things that you
Speaker 1: learn on Stephanomics, the key key national differences in how
Speaker 1: we like to package our our tomatoes. But obviously, and
Speaker 1: people who listen to this podcast, now this is part
Speaker 1: of a broader problem that we've seeing these um I
Speaker 1: call them supply chain snarl ups, but we're seeing the
Speaker 1: price of things as boring in key areas, components and
Speaker 1: also just an inability to get things. I noticed, and
Speaker 1: it's not just fast to source guys. I noticed the
Speaker 1: owner of Burger King and Popeye's had an intern that's
Speaker 1: Restaurant Brand International. We had a report based on an
Speaker 1: internal study that they've done, talking about the soaring price
Speaker 1: of beef mayonnaise bacon. In fact, it said price inflation
Speaker 1: across the protein market complex has far exceeded even our
Speaker 1: greatest forecast. So this is this is a global issue,
Speaker 1: isn't it. Alexander Definitely. Supply constraints are really really bad everywhere.
Speaker 1: One of the issues I was saying is China because
Speaker 1: they are, for example, the steel is all going to China.
Speaker 1: So they're just issues about packaging. But as you as
Speaker 1: you just said, there are issues about other things as well.
Speaker 1: We know that, um there are no boxes right now
Speaker 1: because of all the Amazon orders. So there's just a
Speaker 1: series of very strange things that are happening. You will
Speaker 1: have trouble finding boxes because they've been using too many. Um.
Speaker 1: You know, last year the issue was people. It was
Speaker 1: workers that couldn't get to places, so we were having issues.
Speaker 1: The tomatoes were riding in the field because you couldn't
Speaker 1: get the people. But now it's actually the materials and
Speaker 1: the things themselves, and you know, there's container shortages, there's
Speaker 1: hoarding mentality still. I mean, there's a lot of products that,
Speaker 1: especially things like tomatoes, not to go back to that,
Speaker 1: but that people were hoarding because they keep for a
Speaker 1: long time, and that just made everything much worse. So
Speaker 1: it's a global phenomenon. It will take a while, yes,
Speaker 1: And I mean I noticed that we had we had
Speaker 1: a big piece on this actually a few weeks ago,
Speaker 1: and I like the way that they captured it because
Speaker 1: it was talking about how, you know, last year it
Speaker 1: was consumers that were holding their toilet roll and their
Speaker 1: tomato saws and whatever else, and now it's companies worldwide
Speaker 1: that are effectively hoardering materials and making things worse because
Speaker 1: they're worried about these supply chains. As you as you've
Speaker 1: been saying, this is obviously one of the factors that's
Speaker 1: pushing up inflation. But we are hopefully going to see
Speaker 1: a shift over the next few months as things open up.
Speaker 1: People won't be buying quite so much on Amazon so
Speaker 1: much stuff, They'll be buying more services, they'll be going
Speaker 1: out more. Right. It's it's almost like water being released,
Speaker 1: you know, after there's a dam that's been breaking, and
Speaker 1: so eventually things will calm down and we'll go backward someone. So,
Speaker 1: I mean that's the theory, at least, I know there
Speaker 1: are other theories about the same, but the theory is
Speaker 1: that there will be an uptick and then things will
Speaker 1: go a little bit more back to normal in the
Speaker 1: In the meantime we shall probably we have to hold
Speaker 1: onto our pastor source Alessandra Miniatria, thank you very much,
Speaker 1: thank you. For some years now, Australia has been conducting
Speaker 1: an extreme experiment with high immigration, welcoming in flows of
Speaker 1: people for a prolonged period that dwarf anything attempted elsewhere.
Speaker 1: Now that flow helped a fuel economic growth to such
Speaker 1: an extent the country didn't have a recession for thirty
Speaker 1: years until COVID nineteen finally did it in. But now,
Speaker 1: after twelve months of closed borders, politicians and the public
Speaker 1: seem to be rethinking the so called Big Australian approach.
Speaker 1: We thought there might be some lessons in Australia's experience
Speaker 1: for other countries grappling with the difficult politics and economics
Speaker 1: of immigration. So we asked Australia Economy reporter Michael Heath
Speaker 1: to give us his take. If you're a visitor in
Speaker 1: this country, it is time as it has been now
Speaker 1: for some while, and I know many visitors had to
Speaker 1: make your way home and to ensure that you can
Speaker 1: receive the supports. That was Prime Minister Scott Morrison last
Speaker 1: year as COVID scale became clear. It sounded innocuous, but
Speaker 1: too many temporary visa holders hoping to become Australian it
Speaker 1: felt like betrayal. Australia has long been a laboratory for immigration,
Speaker 1: managing the politics of a highly sensitive issue that raises
Speaker 1: questions over identity and culture, but in recent times its
Speaker 1: system has started to go astray as the country loaded
Speaker 1: up on temporary migrants. We're offering limited places for permanent residents.
Speaker 1: Those migrating down Under have typically done so in two
Speaker 1: steps in Toronto temporary visa and then applied for a
Speaker 1: permanent one under a points system that ranked people's skills,
Speaker 1: age and so forth. Those points can rise or fall
Speaker 1: depending on labor demand, but lately they've been rising as
Speaker 1: permanent visas are directed towards entrepreneurs and high flying professionals.
Speaker 1: That's left lots of would be Australians disenchanted. Actually, we
Speaker 1: were still in school and the discourse started rising, so
Speaker 1: we were like, you know, we were we knew that
Speaker 1: we have to stay in school for two years with
Speaker 1: my class man that was our cos Percy, who with
Speaker 1: wife Marina, arrived in Melbourne from Budapest in two thousand
Speaker 1: and seventeen. He a former chief financial officer at the
Speaker 1: Hungarian State Opera. She a communication specialist. They're the sort
Speaker 1: of people Australia once courted, but they've been in limbo
Speaker 1: since our cost paid to do a mark his degree
Speaker 1: in accounting, a profession he was told was in demand.
Speaker 1: Now he's not sure he will have enough points to
Speaker 1: stay permanently. As I mentioned, was sixty times. When we
Speaker 1: arrived it was seven d n. It went on seven
Speaker 1: and we just carculated that no way we can get there.
Speaker 1: So it was like if this, if this trend continued,
Speaker 1: then we won't have a chance. And all of my
Speaker 1: class me actually got the residences. After four years, he
Speaker 1: and Marina have given up and I headed to Canada,
Speaker 1: which offered them permanent residency. Australia's system today seemed less
Speaker 1: fair than its original seventy five years ago at Bonnagalan
Speaker 1: and you had Albrey. They're making new Australians. Eight hundred
Speaker 1: and forty people from the Baltic States are going to
Speaker 1: school here for Australia's migration policy has determined that never
Speaker 1: again shall our new citizens be falsd to fend for themselves.
Speaker 1: We who had driven from our homes at overjoyed to
Speaker 1: be welcomed as new Australian citizens. Those horrible years now
Speaker 1: seemed like a night now many of us, how a
Speaker 1: lot all their relatives. Until the end of World War Two,
Speaker 1: Australia's population was drawn almost exclusively from Britain. But after
Speaker 1: narrowly escaping invasion by Japan, Australia broadened its horizons. In
Speaker 1: the post war period, it initiated mass migration under its
Speaker 1: rubric of populate or parish, Australia opened its doors to
Speaker 1: European refugees. Jock Collins is a professor at UTS in
Speaker 1: Sydney and has studied immigration for almost half a century.
Speaker 1: Australia is one of the great immigration nations of the world.
Speaker 1: In the post forty five period after the Second World War,
Speaker 1: there are only four countries that became settler immigration countries Australia, US,
Speaker 1: Canada and New Zealand, and as a proportion of the population,
Speaker 1: we have had a much bigger migration program than any
Speaker 1: of the other countries. Australia was, however, determined to preserve
Speaker 1: its British character. It's set up the ten pound pomp program,
Speaker 1: whereby the government paid most of the fair for Brits
Speaker 1: to come to Australia, but that white Anglo saxon Australia
Speaker 1: is now a distant memory. Today half of Australia's million
Speaker 1: people are either born overseas with Asia now dominant, or
Speaker 1: have a parent who was almost one in three year
Speaker 1: first generation. Here at Sydney's Fish Market, many stores set
Speaker 1: up by Greek and Italian families in the nineteen sixties
Speaker 1: have now been brought out by Chinese families. Like each
Speaker 1: wave of migrants, they bring a new style and touch.
Speaker 1: These days, an awesome variety of sushi is available and
Speaker 1: products are packed with immense care. Just as they're heavily
Speaker 1: Asian clients like it. It's okay. The last vestiges of
Speaker 1: the racist White Australia policy were finally abolished by the
Speaker 1: the Labor government in nineteen seventy three, but it took
Speaker 1: a bit longer to mean something. If it was up
Speaker 1: to you, now, which country would you head for? I
Speaker 1: think all of the person in the world now I
Speaker 1: want to go to Austolia. Well, the dominant feeling was
Speaker 1: that we had to give these people a home, especially
Speaker 1: people have been associated with over the Australian Embassy or
Speaker 1: That last voice was Conservative Prime Minister Malcolm Fraser who
Speaker 1: opened the door to tens of thousands of refugees from
Speaker 1: Indo China after the Vietnam War. We were leading the
Speaker 1: world in the eighties and nineties when we were sort
Speaker 1: of introducing multiculturalism and that sort of settlement policy. Jock Collins. Again,
Speaker 1: there was a time in which Australia was a model
Speaker 1: that other world countries looked at, particularly as other countries
Speaker 1: in Europe and not discovered immigration was an important thing.
Speaker 1: In two thousand and one, facing a title election and
Speaker 1: with rising numbers of people arriving illegally by boat from Indonesia,
Speaker 1: Conservative Prime Minister John Howard deployed the navy to stop them.
Speaker 1: He politicized border control and then wrote it to victory. Ironically,
Speaker 1: that tough border stance allowed his government to ratchet up
Speaker 1: legal immigration. It was needed as Australia's economy boomed in
Speaker 1: response to China's demand for minerals. Between the second half
Speaker 1: of and the end of two thousand and nineteen. As
Speaker 1: Australia's economies that had developed world record for a stretch
Speaker 1: without recession its population increased by forty The new arrivals
Speaker 1: and their demand for housing and goods helped the economy surge.
Speaker 1: The nation had found a sweet spot. The points system
Speaker 1: attracted smart, educated, younger people from across the globe. Meanwhile,
Speaker 1: it's education industry, the country's fourth largest export, also offered
Speaker 1: a path to permanent residency for talented students that appealed
Speaker 1: to Prime Minister Boris Johnson, who argued for something similar
Speaker 1: once the UK left Europe. Australia's draconian response to illegal
Speaker 1: entrance by boat seemed to appeal to President Donald Trump.
Speaker 1: In fact, Australia is too faced on immigration, exceptionally severe
Speaker 1: toward a legal entrance, while generally welcoming toward legal arrivals.
Speaker 1: The Grant And Institute is critical of the government's approach
Speaker 1: in a new report, Gone is the time tested policy
Speaker 1: of courting young skilled migrants best place to succeed down under. Instead,
Speaker 1: two fits of permanent visas now go to entrepreneurs who
Speaker 1: have brought negligible investment and an untested high flyers program.
Speaker 1: When this whole crisis started, you know, the whole government
Speaker 1: and everyone pretend that they have nothing to do with
Speaker 1: the immigrants. That was our cost percy again, and everyone
Speaker 1: is here just because they have nothing else to do.
Speaker 1: So it's like they have no no responsibility over this.
Speaker 1: I don't know, two million temporary vies, the holders who
Speaker 1: live here and who have a life here. As Australia
Speaker 1: moves on from the pandemic, it's reputation as a melting
Speaker 1: pot for the world is changing and the landdown Under
Speaker 1: is grappling with the same immigration challenges as the rest
Speaker 1: of the world. For Bloomberg News, I'm Michael Heath. Well
Speaker 1: that's it for this episode of Stephonomics. I'll be back
Speaker 1: next week with a lot more from around the world.
Speaker 1: And remember, in the meantime, you can get a lot
Speaker 1: more news and analysis from Bloomberg Economics by following our
Speaker 1: economics on Twitter. This episode was produced by Magnus Hendrickson.
Speaker 1: The special thanks to Dr Carmen Reinhardt, Alessandra Miliaccio and
Speaker 1: William Heath. Mike Sasso is executive producer of Stephonomics and
Speaker 1: the head of Bloomberg Podcast is Francesca Levy.