Australia will benefit from stronger growth in US, Japan
Australia is unlikely to be affected much by the US Federal Reserve's plan to end quantitative easing, or Japan's "three arrows" of stimulus known as Abenomics - unless, of course, they work.
That's the consensus of economists in Fairfax Media's half-yearly economic survey. And for Japan, there was also a consensus that Abenomics will not work.
The floating of the Fed's plan has already had an impact on the Australian dollar.
Mark Crosby, of the Melbourne Business School, expects a second wave impact to lower the dollar once quantitative easing finally ends - but says that will not happen until late next year.
There has been vigorous debate on the Fed's plan, with global sharemarkets tumbling, and Nobel prize winner and stimulus hawk Paul Krugman denouncing it in The New York Times under the heading: "Et tu, Bernanke?"
BT chief economist Chris Caton calls the market reaction "simplistic", adding: "The Fed isn't stupid; in fact, it hasn't been stupid since Greenspan left.
"The Fed will taper [purchases] only if the US economy is showing clear signs of a pick-up in growth. What's better for the market - 3 per cent growth and a taper, or 2 per cent growth and no taper?"
A US economy growing faster, our panel agrees, would be in Australia's interests. "While markets might find it uncomfortable, the real economy should benefit," says Nigel Stapledon of the Australian Business School.
The benefits would include a lower Australian dollar and a bigger US export market. The main cost our panel sees is that global bond yields will rise - "moderately", says Macquarie's Richard Gibbs - as the Fed's reduced bond buying tapers off, making finance more costly for corporates and governments.
Our panel was less complimentary about Prime Minister Shinzo Abe's plan to lift Japan's growth by firing "three arrows": policy measures that will loosen fiscal policy, loosen monetary policy and unleash structural reform.
The verdict was almost unanimous: only the last will have any long-term impact on Japan's growth, and Mr Abe has yet to unleash it. Merrill Lynch's Saul Eslake was the kindest, musing that he might be waiting until after the upper house elections.
"The first two arrows can only buy time for the Japanese government to implement the third arrow of micro-economic reform," says the Commonwealth Bank's Michael Blythe. "However, Abe has not provided a detailed plan of microeconomic reform yet."
Monash University's Jakob Madsen is aghast that Japan, with a debt to GDP ratio over 200 per cent, could embrace a solution that means issuing even more debt. As Japanese baby boomers retire and sell their bonds, he warns, the new foreign owners will force higher yields "and that can be disastrous for the Japanese economy".
Panel members agreed that the solution to Japan's low growth lies in opening its borders to young migrants to offset its ageing problem and reforms, including tax reform.
Renegade economist Steve Keen says Japan must write off old private debts.
"Excessive private sector debt, and the failure to shut down zombie banks was the main factor that started this slump," he says.
"The debt has to be written off [with minimal damage to savers] before investment will ever sustainably start again."