 Good morning everyone and welcome. My name is Richard Mord. I'm the director of the 2020 ANU Crawford Leadership Forum and today I'm joining you from Canberra, which is on the traditional lands of the Nunawal and Nambri people. Now Australian audience are joining us from many different parts of the country. So today we acknowledge and celebrate the first Australians on whose land we meet. And I pay my respects to elders past and present. Then I extend those respects to any Aboriginal and Torres Strait Islander colleagues who may be joining us today. I'm really delighted that you could join us this morning for the first ever online ANU Crawford Leadership Forum. And we really hope in taking this program online that we've replicated the best qualities of the Leadership Forum, including our senior speakers and also our diverse invitation only audience spanning government business, non-government organizations and the research and academic community. I'm also really delighted this morning that the ANU's Chancellor Julie Bishop is joining us today. I'm gonna introduce Julie in a minute, but first a reminder that we also want to try and recreate the interactivity and intimacy that's also part of the Leadership Forum culture. In other words, we encourage you to participate in this conversation and to ask questions. Now, here's how you can do that. There are two ways that you can ask a question. First of all, you can enter your question into the Q&A box on your toolbar. And then if you want to ask the question yourself, if you then click on the raise hand button, your name will then be read out by the chair. It's just gonna be a delay of a couple of seconds while we enable your microphone and then you'll see that you can then turn on your camera and microphone yourself. And when you see yourself on screen, you can ask your question. If you don't want to appear on screen and you're happy for the chair of our conversation to ask your question, just type not live in front of the question. And if that all sounds a little complicated, don't worry because these instructions will be posted. Final point from me, this session is being broadcast on ANU TV and it is a public session. So look, now it's my great pleasure to introduce Julie Bishop, Chancellor of the Australian National University to say a few words. Julie, over to you. Thank you, Richard. And good morning, everyone. I join you from the beautiful city of Perth, which is still behind closed borders in Western Australia on the traditional lands of the Noongar people and I pay my respects to elders past and present. Welcome to the digital version of the Australian National University Crawford Leadership Forum. And I'm delighted that this significant fixture on the ANU calendar has been able to adapt to the COVID world, the new normal of online meetings, otherwise known as Zoomland. I think it's as important as ever for a dialogue such as this to continue. And I'm so pleased that we have a lineup of speakers quite outstanding to discuss some of the very difficult and complex challenges we face today, as well as the opportunities that may come from this unprecedented global pandemic and these uncertain times in which we live. Today's agenda has been divided into two. This morning, our panellists will look at the global economy and COVID. As we know, the pandemic has hit different countries at different stages and at different levels. And so it's early days to judge what's happening in the global economy. But governments around the world are spending enormous sums of money, driving up debt levels in order to support their economies and in particular support jobs. Tourism and international education will obviously be severely impacted and will they return to their pre-COVID levels? I'm sure Reserve Bank Governor will have some thoughts on what we do about these increasing debt levels and what is a sustainable level of spending. Then this afternoon, we're turning to Australia and COVID-19. Where to from here? Again, state and federal governments have been putting in place extraordinary measures to deal with the impact of the restrictions that have been put in place to flatten the curve. And while the incidence of the infection here in Australia is relatively low, the economic impact will still be dramatic. So these and other fascinating and challenging questions will be contemplated today. I'm so pleased you could all join us and I'll now hand over to this morning's Chair, Renee Fry McGibbon, from the Crawford School of Public Policy. Over to you, Renee. Thank you, Julie. Welcome, everybody. I'm Renee Fry McGibbon, Professor of Economics at the Crawford School of Public Policy at the ANU. And I'm co-director of the COVID-19 and the Macroeconomy Research Program at the Centre for Applied Macroeconomic Analysis in the Crawford School. So we're excited to have you join us for our panel discussion today on the global economy in COVID-19. But let me also begin by acknowledging and celebrating the first Australians on whose many traditional lands we meet through Zoom today and pay my respects to the others, past, present and emerging. So in this session, we have a distinguished panel of economists from US, Asia and Australia who are dealing with the economic issues that are arising from the evolution of COVID-19. So let me first begin by introducing our panellists. We have Catherine Mann, Yu Ping-Huang and Phillip Lowe. Catherine Mann is managing director and global chief economist at Citi, where she is responsible for thought leadership, research guidance of a global team of economists and cross-fertilization of research across macroeconomics, fixed income and equities. She was chief economist at the OECD, Finance Deputy to the G20, the Barbara 54 and Richard M Rosenberg Professor of Global Finance at Brandes University and director of the Rosenberg Institute of Global Finance. She has also held positions at the Peter G. Peterson Institute for International Economics, the Federal Reserve Board of Governors, the President's Council of Economic Advisers and Advisors to the Chief Economist at the World Bank. Dr. Mann received her PhD in economics from the MIT and her undergraduate degree from Harvard University. Our second panellist is Yu Ping-Huang, who is director of the Institute of Digital Finance and Jing Guan, chair, professor of economics and deputy dean of the National School of Development at Peter University. He is a member of the Monetary Policy Committee at the People's Bank of China and research fellow at the Finance Research Center of the Council of the Office of the State Council. He serves as chairman of the Academic Committee of China Finance Body Forum and member of Chinese Economist's 50 Forum and the Rio Tito Adjoint Professor in the Chinese economy at the ANU. He has also held positions at the State Council, the ANU, Columbia Business School and City Group. Yu Ping received his PhD in economics from the ANU. Our third panellist is Philip Lowe, who is governor of the Reserve Bank of Australia. Mr. Lowe holds a PhD from MIT and a Bachelor of Commerce with Honours in Economics and econometric from the University of New South Wales. He has authored numerous papers, including on the linkages between monetary policy and financial stability. He's chair of the Reserve Bank Board and Payments System Board and chair of the Council of Financial Regulators and a member of the Financial Stability Board. He also held positions as deputy governor and assistant governor at the Reserve Bank. Mr. Lowe is chair of the Financial Markets Foundation for Children and a director of the Annika Foundation. He is also a signatory to the Banking and Finance Oath. The full biographies of our speakers are available in the conference program. So while you're getting your questions together, remember to put them on the Q&A bar at the bottom of your screen. But while you're doing that, I will now ask some questions of our panellists and we'd love to hear from you. So I'm going to start with Catherine. So just let me begin, Catherine. So you're based in the US. Can you tell us what your experience of COVID has been the last several months? Well, Renee, yes, I'm based in New York. That's where the city's main offices are, 38 Greenwich Street in New York. But there's no longer there, really. There's nobody in the office there at all. And when the city went quite actually precipitously to a work from home protocol in March, middle of March, I actually moved to my permanent residence up in New Hampshire. So from my standpoint, I have a global team. I'm used to working with that global team on remote capabilities. We haven't used Zoom so much in the past, but of course we use it now. So for me, moving from a New York office to a New Hampshire office was actually fairly seamless in terms of the work that I do and the team that I work with. Now, of course, clients are different in the sense that now I'm meeting with clients on a remote basis instead of face-to-face traveling around the world. But in some sense, it's a vision of where we're going to go because city is not intending to have people back into the office 100% until sometime next year. So my apartment in New York, the lease went up and I didn't renew it. So I'm now permanently a New Hampshire residence at least until something else changes. So a little bit different than living in New York where some of my team members are there and it has been much, much more difficult for them than it has been for me. I'm very fortunate. Well, interesting to see how consumers and businesses are going to change after this. But that sort of touches a little bit on your research. So your research at City focuses on the interactions between financial market decision-making and real-side consumer and business investment decision-making and you have a global perspective. Presumably your research has taken on a new urgency, not just for city but for the global economy as well. So can you share some of your insights from your experience on the reactions of consumers and businesses on a global basis to COVID-19? And does this vary with the intensity of an economy's exposure to sectors such as technology, tourism and commodities? So we've been evaluating countries within the global economy through the lens of different sectors. And we've sort of euphemistically called these sectors work sectors and play sectors. Now the work sectors are more manufacturing-oriented, ones where you have a product that is a tangible product that has an inventory. And so those sectors in principle can run down their inventories while they're unlocked down and then rebuild their inventory. So that kind of looks a little bit more like a V-shaped recovery. On the other hand, the so-called play sectors, these are the consumer discretionary sectors. Of course, the people who work in those sectors definitely are working. But we call them the play sectors because they're choice. These are choice. You can choose to go to a restaurant or entertainment or travel. And what we have found of course is that these sectors, once they are not storable, the activities are not storable, they are services, they're hotel rooms, whatever, airplane flights. And so for companies in those sectors, it is absolutely an L-shaped recovery. What was lost in the early part of this year will never be recovered from the standpoint of revenues for a country, for a company. It's also never recoverable for a country as well. Now, when we made this sort of alphabet of recovery, the V for manufacturing and the L, much more for consumer discretionary, what we have found actually, of course, is that the manufacturing is not nearly as much of a V-shape as it seems because supply chains are disrupted, not just because of some geopolitical reasons and nationalistic reasons in the healthcare and PPE space, but more generally, if one factory is closed and your supply chain partner is open, you still have a problem. And so the manufacturing has also been very definitively affected. And the recovery is taking much longer than many people thought. The consumer discretionary sector faces two headwinds, one, of course, is the fear of a resurgent. And unfortunately, it's really very unfortunate. We are seeing some resurgence of those virus cases. And so there's a consumer fear. And so businesses' response to consumer fear with regard to slowing down a production line, having fewer people in a restaurant, masks on an airplane, all of these things are businesses responding to consumer concerns. And of course, in that environment, business investment is not as strong and business employment is not as strong. And so we are very concerned about this pace of return of the consumer, especially in the consumer discretionary space. You put that all together and you look at a very long delay in achieving a pre-COVID level of GDP. We do not see that happening until later on in 2021. Some countries may be sooner, but there's a very long tail in the global economy of countries that are not expected to achieve the pre-COVID level of GDP, even into the end of 2021 and into 2022. So this is not a picture of a recovery that is satisfactory in any way, shape, and form. And of course, this is even given the really substantial and we would argue appropriate fiscal response and monetary policy response. There's more that needs to be done. We have some more time when we ought to be thinking about fiscal choices because as Professor Bishop said, there's a lot of debt. So we have to be thinking about fiscal choices and monetary policy choices that will bolster the supply side of the economy, the productivity growth in the economy because that is going to be essential going forward as a way to repay these obligations that economies are taking on. Some are in more difficult cases than others. The tourism dependent economies are the ones we worry about the most. The manufacturing economies are rebounding a little bit more quickly, especially if they are technology oriented, but even those economies ultimately are going to be hostage to a less robust global economy. So we really need to be thinking about those fiscal and monetary policy actions going forward to set the stage for a more robust recovery and one that has strong productivity growth, essential ingredient. Thank you. So I'll now turn to you, Ping. You Ping is coming to us from Hong Kong. So can you just give us a sense of what your experience of COVID-19 has been? Oh, of course. I'm at the moment in Hong Kong, but I'm normally basically in Beijing. I came back on the Chinese New Year's Day to celebrate the Chinese New Year, but I've been stuck here ever since. That's, my life in Hong Kong is actually not difficult because I live on an island, so I go out hiking every day, which I never would be able to do in my normal life. But Beijing, it was quite a difficult for quite a while. I mean, I came back late January. My original expectation when this whole thing started was that I probably should be able to go back within one to two months. And now it will be very soon for five months, and I'm still not sure if I would be able to go back. There's discussion if we might be able to restart the new semester in September on time. So it's quite difficult. For quite a while, it looks like things are becoming controlled in March from March, but now it looks like there's new cases and economic activities become a lot more uncertain. So I think the one thing I'd just like to say, compared to my previous experience at that time in 2003, when I was in Hong Kong, we had a SARS. And that was very brief. It was sharp decline, but it was very brief. And once economic activities recover, we had like a V-shaped recovery. I don't think this time will repeat the same drama. Yeah, we have a lot of students who went back to China for Chinese New Year and haven't been able to come back to Australia as well. So we know what you're going through. So unless the vaccine for COVID-19 is bound soon, the structure of the global economy is likely to change permanently, particularly considering the use of technology, international trade and supply chains, and China is a huge part of that transformation. So what trends do you see emerging in the Chinese economy that you think will be permanent? Well, I think that the change already started, the rising importance of the digital economy. In fact, I just mentioned the SARS in 2003. The Ali Baba's Taobao Timo was actually launched the month after the end of SARS in 2003. And now today, in fact, the e-commerce already accounted for 30% of the total retail sales. So that's already becoming a big part of the story. But it actually was quite useful during this pandemic. And as Catherine mentioned earlier, business is responding to the changing environment. I saw the digital economy, online activities, and so on. In fact, it became an important macroeconomic stabilizer. I mentioned that I was in Hong Kong for the whole five months. But I actually taught a course during the last semester and it just submitted the final result. Last week. So activities continued. In fact, in some areas, it became even more dynamic. So my expectation is that China will probably continue in that direction. Number one, because we're talking about this so-called the fourth industrial revolution, which will probably push the application of the bigger data, AI, and so on, even in a more significant way. The second is because of the pandemic, people now actually appreciate more of these contactless transactions. Number three is, well, the government now is thinking about the need to further stimulate the economy. And they're thinking to invest more in the so-called new infrastructure. New infrastructure is more related to the IT sector, the bigger data, the cloud computing, and so on. With all these factors, I do expect that the Chinese economy will move in that direction with a much, much more prominent role of the digital economy in the whole economy. So do you think these trends will be a catalyst of significant growth, China? And do you think that these emerging trends might spill over to other countries? And to be... I think that this is a very big thing for China in the next phase. You are seeing basically almost everywhere things are trying to be digitalized, whether it's in terms of manufacturing activities, the services sector, but also finance. So with the government and the private sector joining forces, making a lot more investment and probably encouraged by this, what is happening at the moment. So I do think that this will becoming a new theme of the Chinese economy. How much that will stimulate the global economy with the spillover? I think it really depends on what happens in the aftermath of the pandemic. For instance, the global trade regimes, the investment arrangement, and so on. But definitely if China is going to invest more demand for more technology, there will be a lot more demand and interactions with the rest of the world. I'm sure there will be more demand for Australian commodities. It's good to hear. Okay, so I'll now turn to Phil. So the last few months must have been a tough period of time for policymakers like yourself. So thank you for leading us through these tough times. So the tantrum health and economic crisis have been accompanied by massive uncertainty. But we started in a good position relative to other countries in terms of having more fiscal capacity than most countries. A history of sustained growth in a population, at least to now, have followed the distancing restrictions. But if we compare ourselves to where we were before the global financial crisis, we were in a similar strong position. Obviously it's a different type of crisis, but we know that international policy coordination was involved during that crisis. So I'd be interested to know how and to what extent the RBA is working with central banks from other economies and how do you compare the situation working with other central banks now to the last crisis? Good morning and thank you, Renee. You're right, Australia was in a much better position in going into this crisis than many other countries that reflect a long history of responsible fiscal policy, very sound institutional arrangements and a strong banking system. In terms of the cooperation between the central banks, it's been deep and wide ranging. The main form of cooperation, though, is information sharing and comparing notes. The central bank governors have been meeting regularly through video conferences, most of them organized by the BIS. Our staff are talking all the time and I'm chair of the Committee of the Global Financial System and we've been having regular catch-ups. In March and April, we were talking about the extreme volatility in our markets and worryingly the dislocation in government bond markets which were affecting the risk for a yield curve everywhere around the world. And then our discussions turned to the really terrible consequences for the labor market for people, of the virus and economic downturn and how we should respond in terms of policy. So those discussions have been really helpful for me in framing our own policy response. The one area where there's been explicit policy coordination is the provision of a US dollar swap line. The same thing occurred in the global financial crisis. There's, in some parts of the world, there was a shortage of US dollar, so the Federal Reserve set up a facility to supply US dollars into different parts of the world. So we've been having these regular auctions of US dollars in Australia as many other countries have had that the US dollar is often supplied by the Federal Reserve. But in Australia, there's been very little take-up of these US dollars, because Australian banks have little demand for US dollars at the moment. So for the main form of coordination really is information sharing. We're all responding to a common shock and it's good to be able to compare notes. Great, thank you. I might now turn back to Catherine. So in April, the US unemployment reached 40.7% and 6.65 million people filed for unemployment. So in comparison, really 665,000 people filed for unemployment in the Great Recession. The Atlanta Fence Measure of GDP now suggests output growth of minus 48.5% on an annualized basis. And on Monday of last week, the Federal Reserve announced that it would purchase debt issued by corporations to support market liquidity and credit, given the high stress in financial markets. However, the stock market has recovered by 45% since it's lower in March. So given the devastating numbers in the real economy and these extreme policy measures, how can I disconnect between financial markets and the macroeconomy be explained? And will the devastation that we're seeing in the macroeconomy eventually show up in financial markets? Your microphone's not on, Catherine. You're right, you're absolutely right, Renee. There is really quite a striking disconnect between the measures in the financial markets and the measures of the real economy. I note that even amongst my financial market colleagues, they too are very concerned about this disconnect. They're very worried that there's going to be a comeuppance for financial markets and not just the equity markets. We see it in the spreads in the investment-grade space. We also see it in the high-yield space. So there's been quite a bit of narrowing on the expected that either the economy is going to perform much better than most of us expect, or that there is a permanent backstop from the Federal Reserve. I think it's important, though, to step back just a little bit to the time when this very significant market dislocation happened on March 23rd. And at that time, the Federal Reserve was faced with, and actually the fiscal authorities as well, with a tremendous upheaval in the financial markets. And it was 100% appropriate at that time for the Federal Reserve to pull out a real range of policies and programs that they had originally come to put together in the context of the global financial crisis. It was critical at that moment because we were already in the throes of the COVID crisis. And the potential at that moment was for another global financial crisis to evolve on top of a disease crisis, a virus crisis. So it was absolutely appropriate at that time to come forward with the programs that they put into place. Now, time has passed and those programs have been very successful. Perhaps just announcements alone had a major effect on the economy, but it was also backed up by the fiscal. If we go back to the timeline, it wasn't the Fed alone. It was also the fiscal authorities and the very robust programs that they put into place. But time has passed. And as I noted before, we need to, even though the virus is not behind us yet, we do worry about the second waves, we have to, as policy makers, we have to be looking forward and we have to be looking not to exit. I mean, that's way too early a word to be considering, but we have to be looking at what are we putting into place in order to create an environment going forward where there is productivity enhancing growth to be supportive of the debt, burdens that are being taken out appropriately, taken on, now you have to look forward to how are we going to repay it. That also has a policy element to it that is critically important. And I might argue that Europe with its focus on the Pan-European Recovery Fund, the emphasis on the digital and climate, that does create an environment where business investment has to step up because digital and climate require new investment, new ideas and innovation. We don't see that yet in the United States. There's some discussion of infrastructure projects, but that's kind of a limited. So I think it's an important distinction between the US and Europe when we think about on the fiscal side. On the monetary policy side, I think the issue here is that the financial markets get very comfortable with a backstop. They get very comfortable with the Fed having the tools to narrow the spreads kind of indiscriminately. Everybody's on the high yield market in particular. All the spreads are narrow. Some of them should be wider than they currently are. And the equity markets too are, you could say, well, they're looking forward to next year when everything will be better again. But you can say, no, actually, it's not better next year. It's only as good as it was last year. And that's really not good enough for an awful lot of people. And it shouldn't be good enough for the equity markets to be performing the way they are. You, Ping, are now turned to you. The behavior of business and consumers has changed in terms of how payments are made and received as a result of COVID-19. Some merchants prefer contactless forms of payments and are refusing to accept cash for health reasons. And meanwhile, consumers have moved to online shopping where there is no facility to use cash to purchase goods. So as director of the Institute of Digital Finance, do you think that the accelerated move towards a digital economy will be a permanent change? Well, certainly, I think, I mean, China actually is leading in terms of mobile payment. And we have two largest mobile payment service providers like WeChat Pay and AdiPay. Both of them, each of them, actually have something like around 1 billion active users on each of their systems. So it's been quite extensively used. And nowadays, people like me going out normally wouldn't really carry any cash in my wallet. So a mobile phone would really be sufficient. And that's actually quite extensively used. The biggest thing and the most important contribution really is to extend the financial services to people that otherwise would never be covered by the traditional financial services. So for instance, people in the remote areas, in the Western region and so on. And as I said, when more than 1 billion people using the mobile phone, this is really a big, big advancement and going forward. The second thing, what these mobile payment services providers did was they're also trying to cover these businesses, so-called offline businesses. There is one thing I'm not sure if your audience is familiar with these payment techniques. There's so-called quick response codes. This is one special note that you can print on the paper and then you put it on your store and people can come in just to pay using their mobile payment. Ruling out these quicker payment codes, the QR codes to the offline, the street-side stores. You're including all these businesses into your system. We had a recent account and roughly they're close to 100 million stores, small business, what we call them offline small businesses. They're already as a part of the mobile payment services. So that is really playing a very big role. So I'm not sure if this is going to become a new trend. It's already here. It's already covered almost 100 percent of these offline businesses. But the final big change, and I think we start to become a lot more appreciative, is that even during this pandemic period, you're able to extend the loans to these businesses that still require some financial assistance because most of the bank branches actually shut down because of the lockdown and social distance policies and so on. But these online banks, these new banks, we have three new internet banks called My Bank, We Bank, XW Bank. They continue to extend a lot of loans for a couple of reasons. Number one, because you do have a big tech platform which as I said, each of them already has something like 1 billion active customers. So customer acquisition is no longer an issue. And in fact, because of the long tail feature, marginal cost of servicing additional customers is very, very low. That's the first thing. You already have all these tech customers at the doorstep of your bank, the virtual bank. The second thing they did was use big data analysis and trying to do credit risk assessment because usually the banks will only be able to manage the risks by looking at your financial history or looking at your financial assets. But now you can look at actually your digital footprint and using the so-called machine-running models. We just completed a joint study with IMF economists which will be out as a working paper just to show this FinTech approach for credit risk assessment actually works better than the traditional approach both because of the information advantage and because of the modeling advantage. The third thing is because once you have a big tech platform you can actually monitor the whole process from the long application to landing and in fact Alibaba, the My Bank they have this so-called 310 model which basically means a potential customer can apply for a loan filling in the form online within three minutes. If the loan is approved the money is in your account within one second and number three, there's zero human intervention in the whole process. So that kind of new technology really is changing the life and changing the financial industry in China. My Bank alone at the moment already serves like more than 20 million customers extending loans every year. So that is, I think, is not just a new trend. It's a revolution, especially for financial inclusion. Great, thank you. So we might now turn back to Phil. So now that the Fed is purchasing corporate bonds to stimulate the US economy how effective can monetary policy in Australia be going forward given that US intervention in financial markets will have large effects on international capital flows and will likely appreciate the Australian dollar. Will this new monetary regime in the US reduce your capacity to conduct monetary policy independently of foreign central banks? I think the answer to that, Renee, is no, it won't. I don't see any loss of monetary independence here. We still have the ability to choose the monetary policy measures that are needed for Australia. We've seen recently we introduced a form of yield curve control and we have a term funding facility for the bank system and in the US you see an extraordinary interventions in capital markets because capital markets are very important for you in the United States. So we can still choose the measures that are suitable for our own needs. In terms of the exchange rate we do know that when a country eases monetary policy, exchange rate tends to depreciate. So if everyone eases and we don't, we'd expect the dollar A to appreciate. Now at some point it's true that could become a problem but I don't think we've reached that point yet. I would like a lower currency in terms of macroeconomic outcomes would help reduce unemployment and lift inflation closer to target but at the moment I think it's really hard to argue that the Australian dollar is overvalued. We need to remember that exchange rates are at a lot of prices. And health outcomes in Australia have been relatively good and the economic outcomes so far have been relatively good and I think the future is relatively good compared to many other countries as well and commodity prices have held up. So it's not surprising to me that the Australian dollar is where it is. I'd like a lower one because I'd like a lower unemployment and slightly higher inflation but I'm not worried about a loss because we've chosen measures that are needed for our own economy. Do you think that now would be a good time to visit the monetary policy framework for Australia given the substantial and seemingly permanent changes that we're seeing in the conduct of monetary policy internationally? I don't think it's the right time now to change the monetary policy framework. The one we've had for 30 years has served us very well but as things develop over the next few years we're both looking at it again. At a very high level and I think this is important the objectives of the RBA are set out in legislation that was passed by the parliament way back in 1959 and those objectives are price stability, full employment and the promotion of economic welfare of the people of Australia. In my view those objectives have stood the test of time and at a very high level they continue to guide our policy. Over the past 30 years we've thought the best way to pursue those objectives was to have a flexible medium term inflation target and that's served us really well in time it might be worth looking at whether there are other ways to achieve those very high level objectives that are set out in legislation. At least though at the moment my view is that it's not clear that there's a better framework than the one we have but it's worth continuing to look at ideas. Whatever framework we have though I think it's likely we're going to see interest rates at their current level for years so we can change the framework but I don't think it's going to change the outlook for interest rates over the next few years given the deflationary forces in the world economy the large output gaps that exist and the dynamics right around the world I think we're going to have lower interest rates for a long period of time whatever framework we have. Thank you. Thank you. We have a question from the audience so Warrant and Kippen would you please like to turn on your video. As Catherine said we're no near the end of this pandemic and what we are likely to see further waves until there's a vaccine my concern though is a lot of policies around the world that have been predicated on coming to an end very soon. It seems to me that by creating this enormous uncertainty with our fiscal cliffs in Australia's case in September do you think that's such a good idea and that we should be actually doing whatever it takes to keep the world economy functioning and secondly part of the problem I understand is a very large build up of government debt is this a problem where we have negative real interest rates to the extent we have should we be more creative with the way we finance some of these interventions for example income contingent loans or revenue contingent loans for small businesses could be a way in which the fiscal position doesn't actually get impacted if in fact those companies and those individuals whose incomes return to more normal levels actually get to repay the loans. Thank you. We would like to address those questions. Well I can that last point I think it's been a long time it's been a long time it's been too bad that we're not in Australia at this very moment so there are different ways I think two points one that I already made which is that we really have to be looking forward to be more creative more thinking about how do the policies that we put into place now support productivity enhancing growth going forward is critical and as I say some economies policy makers are addressing that to a greater degree than others now the creativity part I think we have seen some creativity in some countries with regard to the use of a guarantee instead of a straight spending so there in Europe in particular and not all the countries within Europe have been able to do that but there have been much more deployment of a guarantee function and that is not exactly an income contingent but it does serve a bit of a function because it basically means that the government stands behind the activities and the loans and the guarantee is only called if the overall climate deteriorates to the point where the businesses cannot function which of course in the context of Germany would also impact the banks negatively so that is an important sort of creative strategy which does not use the fiscal instrument as a as a bump tool, a tax and spend but more as a guarantee and there could be more room for that sort of thing in my view it does have impacts on the financial markets you can't get away from that but it is assuming that you can get that your policies as a whole will move the economy onto a more robust growth path and so your guarantees serve that purpose and they do not get called Renee, Philipp here can I come in and Warwick asked whether we should be doing whatever it takes and I think that is the answer to that for me is yes I have seen what we have been doing is building a bridge to when we get to the other side once the virus has passed because at some point it will pass and to build that bridge we need to throw everything at it both on the fiscal and monetary front I think it has been an entirely appropriate thing to do when we get to the other side though once we have built the bridge we get the other side of the recovery is taking place I think we do face a world where there will be a shadow from the virus for quite a few years people will be more risk averse they won't want to borrow in Australia we are going to have low population dynamics so unless we change something we are going to have a world of slower growth in Australia and if that is the world we are in we can't resolve that problem by just continuing to borrow borrow to build the bridge but we can't borrow to address a slower growth world but what we can do is reform and the list of areas where we should be doing reforms are well known they include tax, infrastructure, human capital industrial relations, regulation entrepreneurship and R and D if we don't address those areas then I think we will just meander along with kind of mediocre growth and we can't borrow a way out of that but we can borrow to make investments in these areas to lift our potential growth rate back up to where it was before it's the right thing to borrow now to build the bridge and it will be the right thing to borrow to make investments in our future we did have another question from the audience it seemed to have lost my Q and A's but I have plenty of questions of my own until that comes back up I might turn to Phil a recent report from Deutsche Bank shows that low interest rates and leverage in the corporate sector have created an environment for zombie firms as unproductive firms can remain alive preventing investment and employment in more productive firms so this will ultimately lower growth in the economy so you are now conducting unconventional monetary policy and the interest rates are incredibly low how can Australia avoid developing a zombie economy being in an ultra low interest rate environment I don't think we've got a zombie economy I'm not really worried that there are a whole bunch of zombies around in the Australian economy that are consuming financial resources and workers and scarce physical assets preventing the successful dynamic companies from growing I think that's not the world we're in there's a lot of spare capacity firms with good ideas can attract financial capital they can attract resources and they can attract workers so I don't think it's right to blame the zombies but I do think there is a more general issue here which is actually more important and that is a lack of economic dynamism in Australia and I've been concerned about this for some years and I'm even more concerned about it now while the virus hit we saw slow rates of business formation we saw low rates of job switching and we saw reduced research and development expenditure in Australia so there are all signs that we're not as dynamic as we used to be I don't think you can blame zombie firms for that it comes to things that are deeper the society's attitudes to risk taking the nature and extent of regulation regulate whenever we see a problem incentives we set up in the tax system for entrepreneurship and the arrangements for research and development and failing firms exiting the market so they're the things that are making us less dynamic so I'm not blaming the zombie firms that are surviving at the moment remember those zombie firms if they exist are employing people which is good and there's plenty of capacity for strong firms to grow it's these deeper things that worry me and they go to the society's attitudes to risk and entrepreneurship that's the thing we should be focusing on so I have a question from Paul Lindwell which is what are the implications if there is a permanent systemic increase in risk aversion as a result of COVID-19 would these reduce innovation, lower productivity etc and is there likely to be anything that can usefully address this I'm not sure who that is but who would like to try to answer that one I think Governor Low just basically gave the answer to that one I think there will be a kind of a protracted period where people are more risk averse and that means they're going to be less likely to spend and firms are going to be less likely to invest so do we just accept that I hope the answer's no I think governments and business re-energise the entrepreneurial spirit and make investments that leverage off the fantastic technology that's around in the world we're all finding new ways of using this technology I think that's going to have a long benefit over time but a comprehensive reform agenda by governments backed by business I think will make a difference and re-energise the sense of optimism that people have about the future if we don't do that I think there's going to be a long exciting risk averse low growth in wages asset prices not moving very very far and just a general sense of malaise but that's not inevitable we have one other live question by Daniel Moss Daniel could you please turn on your camera and Mike Phil notwithstanding your comments about the framework perspective when central bankers have talked since the onset of Covid the first thing they address and the thing they address most articulately is the prospect of long term scarring in the labour market and the very high rates of unemployment now most central banks have some sort of text in their mandates about full employment yet rarely if at all is this a numeric employment or unemployment target similar to the 2% that figures in a lot of inflation targets is it time or is one consequence of this era a move to a numeric easily identifiable labour market type target of some kind I don't think it makes sense to have a target for the unemployment rate the same way we've had a target for the inflation rate we're seeing at the moment how the unemployment rate can be a misleading indicator of what's going on in the labour market with this big decline in employment many people have left the labour force the unemployment rate has not risen that much so the labour market is much richer than we need many more sources of information than just the unemployment rate over recent years we've focused a lot on under employment as well so people who have part time jobs who want more hours that's a form of under employment we just don't know what constitutes full employment in terms of unemployment rate so I think it would be low to commit to a specific number the general point though the legislators back in 1959 knew this as we should be seeking to get to full employment however we define that in terms of unemployment under employment hours worked that's the right objective to have to be at full employment I don't think we get much from putting a specific number for the unemployment rate on that just to answer from the experience of the United States the United States has had an extended period of time where the unemployment rate kept falling well below what anybody would have thought was the non-inflationary non-accelerating inflation rate of unemployment so-called NARU and if there had been an explicit target of unemployment at NARU which people thought of was maybe 5% maybe 4.5% or so then the last period of time where more and more people were brought into the labor market including people who had left the labor force those people would not have become unemployed the Federal Reserve would have tightened sooner and would have gotten further and further away from the inflation objective I think the challenge is when there's multiple objectives and not all central banks have dual mandates I think the challenge here is that you don't want to move further away from one objective because you've met one of the targets when in fact as Governor Lozaz there are extended uncertainties about getting to the NARU it's not a magic number you would hate to be in an environment where you tightened monetary policy too soon and left people out of participating in a labor market and that's what you would worry about the most in the context of the target so we only have a few minutes left so I just want to finish up by asking you all the same question about your own economies and so that is do you have a positive vision of what your economy will look like as we emerge from the COVID-19 pandemic and what is your vision so maybe we'll start with them Catherine well my positive vision is one that we do have more entrepreneurship we do have more risk-taking we do have more innovation we have more productivity growth it's a vision of the United States that is comfortable again engaging in the global economy with its allies to make differences in the way globalization takes place both on the global scale but also has a domestic policy framework that recognizes that not everybody has been able to enjoy the fruits of either the globalization that we did have or the financial benefits that some people have so there's a lot of inequality in the United States we've seen it play out particularly in the last few weeks with Black Lives Matter and before that over the decade with the manufacturing erosion and so forth so that is a domestic policy problem but you cannot do the effect of domestic policy in an environment of retreat from globalization and retreat from technological innovation so you need those two pillars technological innovation and deeper global engagement in order to make good on the commitments that you've made to your citizens all of your citizens that's my vision yeah Yiping well there are two things I feel quite optimistic about the Chinese economy coming out of the pandemic the first thing is the digital economy I already mentioned it's already like widespread application in the Chinese economy now with increased enthusiasm of the government and the private sector making more investment and pushing ahead in this area I think that's a one bright spot for the Chinese economy the second area I think I'm paying a lot of attention to is the consumer market I mean we like to say the Chinese economy which was growing at above 9% on average during the last four decades it was mainly driven by number one exports and number two investment that is probably somehow is going to change now given the pandemic but also other global environment and so on and I think consumer market is going to become a lot more important sometimes I say well maybe we could say during the last 40 years China created the two global economic stories the first story was exports of labor intensive manufacturing products there was a one time you go out and it's very difficult to find something that was a labor intensive but not made in China that time is gone now then we had a second global story buying a lot of commodities including commodities from China these are still ongoing but I think gradually will give way to the consumer story China's retail sales will probably be the largest year exceeding that of the US but we continue to see rise of consumer spending going forward even if economic growth slows in the coming years because number one the saving rate of the household probably will gradually edge it down but at the same time household income as a share of national income is rising so overall I see this as the most the dynamic story I think it could actually be the next global story that China will be able to contribute to the world economy and that has something to do with the so called the shifting of the supply chain there was one story I just saw a survey by Japanese manufacturers in China looking at where they're selling the products most of the Japanese companies actually sell more than 80% of their products in the domestic market there was a question when you want to consider to relocate away from the Chinese market where is your closer where is your consumer that's something I think will be very interesting to watch Thank you, Phillip Thanks Renea, I too remain fundamentally optimistic about the future Australia has a fantastic set of underlying fundamentals and once the virus is contained and we find antivirals or a vaccine those fundamentals can reassert themselves just recently we've got on top of the health crisis better than many other countries our political system has responded in the way we would have hoped it would have and the economic downturn in Australia has not as been as severe as others and it's not as severe as we expected three or four months ago I thought that our work in Australia could fall close to 20% I think the number is now likely to be close to 10% so it's not nearly as bad as we had anticipated having said that I think there is going to be a shadow from this crisis that's going to last for perhaps years I talked about the reasons for that previously we can move out of that shadow slowly or we can move out of it quickly the two things that will help us move out of the shadow further advances in technology and it may be now we're going into an accelerated period of technological progress as people leverage off the new ways of working it's possible the other thing that will help us is policy reform and I talked about the areas previously that would help here and I've been encouraged recently that the government has moved in a number of these areas it's talked about industrial relations it's talked about infrastructure and it's talked about the need to reduce regulation I think if we can make progress in those areas then Australia can again look forward to strong and sustainable growth and rising living standards for Australians I fear if we don't leverage the advances in technology and we don't see policy reform will just go on and meander and kind of have slow growth and slow growth in incomes but it's not inevitable and we have the capacity to return to strong growth and the response that we've seen in Australia for months gives me confidence that we can leverage of those opportunities we have and Australia has done remarkably well over the past few months relative to many other countries both on the health front the political cohesion and the economic front and that should give us all confidence that we can meet the challenges of tomorrow as well thank you so we've come to the end of our time it's been a pleasure to spend the last hour with our panellists and our Zoom audience and our speakers and attendees who are not necessarily in a convenient time so usually this will be the time that we give our panellists a round of applause and although we can't hear you the world needs good karma so please give our speakers a round of applause at home thank you