08/06/2016 Asia Business Report


08/06/2016

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Now it's time for Asia Business Report.

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Low word expectations. The World Bank slashes outlook for world trade

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and investment. And the cost of climate change. This week's storms

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in Sydney, out they a sign of things to come? -- are they. Good morning,

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Asia. Hello, world. Welcome to Asia Business Report. Thank you for

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investing your time with us. The World Bank has downgraded its growth

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forecast for the global economy to 2.4%. Just six months ago it was

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expecting to expand by nearly 3%. One of the main reasons for this

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revision is a slowdown in global trade activity. Earlier, I spoke to

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The World Bank. One of the lead authors of the report. He told us

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what led to this downgrade. The downgrades focused on commodity

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exports economies. Given the low commodity prices we see weakness in

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exporters. Look around the world. You see weakness in global trade and

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financial flows. At to this, of course, depressed commodity prices

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biting growth and you end up with this outcome. And we have seen Japan

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and the US with massive downward revisions. Japan is the third

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biggest and the US is the largest economy. What pressure does that put

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on growth? The US and Japan count for a significant part of global

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output. When these two economies slow down they have effects on other

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countries because of the demand for goods produced from other countries

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declining. With the US, we saw weakness earlier in the year. For

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the rest of the year the economy will stabilise, we think. Japan, the

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economy is going through a low growth equilibrium. The recent

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earthquake did not help. That makes for dire reading. Doom and gloom.

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What are some bright spots? There are some. Look around the world. We

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see economy is that import have been resilient. -- economies. They have

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had benefits from the low import price. We expect them to grow around

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5.9% this year. This is very close to the long-term growth average. In

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the context of Asia, especially East Asia, you see countries like the

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Philippines, Vietnam, Myanmar, putting rather strong growth

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numbers. So there are some bright spots. The World Bank. Despite what

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he said about Japan, the country has just revised its growth figures from

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the first quarter to a slightly better figure. It came in at 1.9%,

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the GDP, compared to the initial estimate of 1.7%. But it still faces

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big challenges, especially from the strength of the currency. The

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managing director of an advisory firm explains what has been driving

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the yen higher. There was a little bit of damned if you do, damned if

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you don't. The main point is that the investors, foreign investors,

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were getting sceptical on Japan's commitment, as well as their ability

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to achieve the 2%. That is on the Japan side. The second factor is

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that I think there was money shifting back to Japan. Not just

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speculative money, but Japanese corporate is with overseas earnings

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going back to Japan so big -- corporates. They want to buy them at

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110 yen and it was 100. So they wanted to do that. And the third

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reason, in our recent research we looked at the past. We fed

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tightening cycles and how the yen behaved. In all those, what is

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common is that with exactly the same combination as today, in all three

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instances, the yen strengthened. In other news, Ralph Laurent is closing

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stores and slashing jobs to try to reverse its falling fortunes. Best

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known for its Polo shirts plans to shut more than 50 stores and will

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cut 8% of its 50,000 workforce. They expect to have savings of up to $220

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million a year. That is the first big move from the replacement for

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the company founder, rather rent, last year the bike -- Ralph Lauren.

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Recent floods could cost $160 billion in France. That is from the

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AFA. That is after floods devastated and affected some 150,000 people in

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France. And Australia has been hit by wild storms which prompted $28

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million in insurance claims just this week alone. But if climate

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change brings more wild weather like this, because in the long-term could

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be much greater. Coastal erosion could cost Australian home owners 65

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billion US dollars over coming decades. Just how big is the threat?

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Earlier, I spoke to a climate institute in Sydney. Australia is

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quite exposed to different effects of climate change. So, all of the

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hazards we are going to see, droughts, extreme temperatures, all

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that. We are also very coastal. Our society. We live within a few

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comment as of the coastline. Especially in the east. --

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kilometres. Lots of our housing and infrastructure is close to the sea.

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So, much of our housing is exposed to sea level rises and other perils

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related to that. You mentioned housing being an integral part of

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the economy of Australia. It accounts indirectly for one third of

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Australia's economy and mortgages account for 60% of the big four

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banks' assets. What can be done in the long-term? Can you defend the

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housing sector from this? It won't be easy. It will require all three

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levels of government. The insurance sector, the banking sector as well.

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And other sectors as well, like construction. We have set out a bit

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of a map of how it could proceed. There have been many policy reviews

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into this over the last decade. So far, very little has been done.

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Australia has had a housing construction boom in the last few

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years as well. In parts of the country, it is still not terrific

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levels of planning controls over, for example, how close you can build

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to the shore and provisions for flooding. Donald Trump and Hillary

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Clinton are all but certain to clinch the nomination is to be the

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presidential candidates for their parties. -- nominations. Donald

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Trump has extensive business interests but has taken intervention

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against free trade, especially with China. Mrs Clinton also opposes the

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Trans-Pacific Partnership trade deal. So how are they feeling? We

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have more from New York. There is a little bit of concern. It is mostly

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because, at the moment, when it comes to economic policy and Donald

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Trump, much is not known so far about what he wants to do. There is

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an understanding in terms of perhaps what he would want to do with

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corporate tax policy, all with the minimum wage, but more concrete

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issues are not exactly clear. -- or. That is what is happening now. Now

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we have seen that both the Democrats and Republicans are starting to

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coalesce around their candidate we will see more details emerge in

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terms of concrete ideas with regards to their economic policies. Of

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course, you were in New York, the capital of America, what does

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corporate America and businesses there want from the new president?

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They will want to see less regulation, less corporate taxes,

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and, you know, those are the things that really concern corporate

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America. Any being that would really hope to encourage more economic

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growth in the US. So, in that way, Donald Trump, some of the musings he

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has made with regards to that, I welcome news. He wants to see the

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loopholes fall corporate taxes closed. -- are welcome news. He also

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doesn't want to see a raised in corporate taxes. -- raise. Hillary

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Clinton also wants to close those loopholes but hasn't made any

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mentions of lowering the taxes. The Nikkei is flat, that is despite what

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I told you about the GDP being better. There are still ongoing

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concerns. Australia has been impacted by the strong dollar. That

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is it for now. Thank you for watching.

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