The University of Hawaii Economic Research Organisation says there's clear evidence the long, deep recession in the United States has ended, and the global economy is showing signs of growth, led by dynamic Asian economies.
Presenter: Sen Lam
Speaker: Dr Byron Gangnes, director of the Hawaii Economy Group, University of Hawaii Economic Research Organization
GANGNES: Well as you know Asian countries took a real hit last year when there was an unprecedented collapse of global trade. That now seems to have largely run its course, many industries have seen a gradual working down of inventories of goods, and so now demand is picking up and trade seems to be leading Asia's recovery.
LAM: And is the recovery in Asia, Asian economies, is that largely driven by domestic demand?
GANGNES: Well it's part domestic and part overseas demand. Certainly there is a very strong regional component. China has continued to grow at a very respectable rate and has accelerated in recent months, and that's driving strong export growth for a number of the other Asian developing economies.
LAM: Well your report says that there's evidence that the US recession has ended, so does that augur well for these Asian economies as well?
GANGNES: Well yes and no, it seems clear now that the US economy is expanding but it's unlikely to grow at a rapid rate over the next few years, so I think it's still going to be difficult to depend on strong demand for exports from the US.
LAM: Well East Asia as a region I think slowed down dramatically last year, so is it showing signs of a quick recovery in the next 12 months?
GANGNES: Well I don't know if quick recovery is the right word, there certainly are very promising signs that exports are picking up and that industrial production is picking up. The countries that were hardest hit were the ones that were most export dependent. And those economies are now seeing trade turnaround, exports are picking up and as they do production will also rise. But it's important to remember that these countries took a very large fall in terms of both trade and also output, and so it's going to take some time to get back to the levels they were at before this crisis began.
LAM: Well Japan of course I think took a severe hit in the current crisis, is the worst over for Japan do you think?
GANGNES: I think Japan is going to have a harder time getting out of this than most of the developing East Asian economies. In part that's because the kinds of exports that Japan is most intensively specialised in are capital goods exports and high end final goods exports into the US and European markets. Capital goods, investment goods, that is really not turned around yet, so those exports are still quite weak, and of course the outlook for growth in Europe and in the US is not nearly as robust as it is for the developing countries in East Asia.
LAM: Well what about domestically in Japan, has it got its banking sector for instance in order?
GANGNES: Well I think so, I think Japan's banking sector is quite healthy and they really were able to avoid the direct effects of the financial crisis this time around. The bigger problem in Japan is that a lot of the growth in recent years really was dependent on export growth, and not terribly dependent on domestic demand. Now of course export growth as I said is I think going to take a while to really ramp up, and at the same time consumers in Japan have very low confidence about the future, unemployment is unusually high in Japan. And so I think it's also hard to see that they're going to get a strong recovery of domestic spending. So I think Japan has a tough road to hoe here.