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Newstrack | Latest Global Economy News

New US Legislation Proposes to Block Internet Fast Lanes

In yet another attempt to ensure equal internet access to all, a new legislation proposing an end to paid prioritization of web traffic has been introduced in the US. When passed into a law, it would mandate the Federal Communications Commission (FCC) to bar internet service providers (ISPs) from charging extra money for faster access to premium content.

internet4Titled as the Online Consumer and Consumer Choice Act, this bicameral bill does not cede any new authority to the FCC in regard with prohibiting ISPs from the creation of Internet fast lanes. Instead of a uniform law applicable to all, the FCC would have to look into each neutrality case individually and examine it. However, this bill gives the FCC the crucial political power in prohibiting unfair preferential treatment.

With demands for net neutrality on the rise, the FCC had also proposed some new recommendations including a provision where FCC scrutinizes each deal such that non-paying content players do not get lost in this money game. It is also seeking people’s opinion on whether broadband internet service should be considered a public utility. 

Consumer advocates have been demanding for completely banning paid prioritization as that would absolutely change the way the internet works. They have also been asking for a clear reclassification of ISPs as common carriers so that they are open, free and off government interference.

ECB Gets Hard on Banks Parking Money with it Instead of Lending

In what could be the first such move by a major central bank, the European Central Bank (ECB) has slashed the overnight deposit rate from zero to -0.1 percent. The intent is to get Euro-area money lenders and banks into lending out money instead of stacking it up as deposits with the ECB. The move is also expected to prevent the region from falling into a deflation pit what with inflation dipping to 0.5 percent in May compared to the 2 percent ECB target.

European Central BankThe bank has also announced a slew of other measures to boost the weak recovery (Eurozone economy grew only 0.2 percent in 2014 Q1) that is currently underway in the Eurozone including slashing its main interest rate to a record low of 0.15 percent from the previous 0.25 percent. The ECB has also paved way for a package of up to EUR400 billion of cheap loans until 2018 to individual banks. The clause being that the banks will get a loan 7% of the amount that they in turn lend to companies thus making more money available for businesses to borrow. In case, inflation does not go up, the bank has hinted that it will look into more unconventional measures including a large asset-buying program similar to the Quantitative Easing pursued by the US.

These measures are likely to take another 9-12 months to show their impact. The bank revised its Eurozone growth forecast to one percent for 2014 and expects inflation to hang around 0.7 percent this year and slowly move upwards in 2015 (1.1 percent) and 2016 (1.4 percent). 

Australia Kick-starts 2014 on a Positive Note but Doubts on Long Term Growth Linger

In spite of expectations of a sub-trend growth, the Australian GDP grew 1.1 percent (against a forecast of 0.9 percent) for the quarter ended March 2014. This takes the annual growth rate to 3.5% over the 12 months to March, the best in about two years. A significant rise in resource exports and home building boosted this growth.

mining1Currently, Australia is one of the fastest growing economies of the world. On an annualised basis, it is growing faster than the US, UK or New Zealand. Although a primarily services dominated economy (65 percent of total GDP), growth has largely been driven by the abundant agricultural and mineral resources (particularly mining). In fact, mining accounted for approximately 80 percent growth in the said quarter prompted by unusual weather conditions. Additionally, with inflation under control, low interest rates, a better than expected jobless rate (5.8 percent in April 2014) and improving private sector credit have helped the economy.

However, the economy is beset with a set of challenges as well. The budget announced last month is not expected to garner too well for the economy. Spending on welfare and public service has been slashed and new tax hikes have been implemented thereby impacting consumer confidence and household consumption. Business investment growth is unlikely to be very promising. Mining investment (the key driver of economic growth) is now growing at a slower pace. Additionally, iron-ore prices are expected to fall this year further weakening the country’s pace of growth. These factors are expected to moderate Australia’s economic growth over the coming months.

US Economy Looks Promising in Q2 2014, says US Fed Chief

After a dull first quarter of 2014, second quarter of US economy outlook looks brighter if one were to go by the US Federal Reserve Chief Janet Yellen’s word.

Harsh winter literally froze first quarter’s growth rates to near zero (0.1%). Yellen believes this pause was temporary. The Fed maintained that the US will advance at a faster pace in 2014 compared to 2013.

us-economyBoth production and spending have improved suggesting a steady rise in the economic growth. Increased business investment, rising consumer spending and improved job growth are expected to fuel this progress. In April, unemployment rate came down to 6.3% from 6.7% (in March) and hiring picked up to 288,000 jobs from an expected 218,000. As growth gains momentum, the rate of under employment and long-term employment are also expected to reduce.  Further, March 2014 retail sales at USD433.9 billion were the best since September 2012.  The downturn ignited by the 2008 global financial crisis is finally expected to come to a halt in 2014 with the US economy expecting to register a 3% growth rate this year. The last time such a strong growth rate was registered was in 2005 at 3.4%. Unemployment rate is also expected to be down to 6.1% at the end of the year.


Overall, analysts seem to sanguine about growth rate and echo Yellen. It remains to be seen how far US economy will go in the face of sluggish housing market and brewing troubles in Ukraine and emerging markets.

Indonesia’s GDP growth slows down marginally; investor confidence remains strong

Indonesia, South-east Asia’s largest economy, reported a slowdown in gross domestic product (GDP) growth for the first quarter of 2014 ended March 31.  GDP growth rate stood at 5.21% for the said quarter compared to 6.02% for the same period of 2013. An aggressive monetary policy that led to high interest rates, lower investment and consumption; and a mineral-ore ban hindered growth.

indonesian-rupiahIndonesia witnessed a bumpy ride in 2013. Tapering efforts by the US Federal Reserve, lacklustre external demand, a falling Rupiah and a huge current account deficit weighed heavily on the Indonesian economy. As a result, the annual growth rate slowed down to below 6% in 2013. However, a weak Rupiah and diminishing imports resulted in a trade surplus of USD1.07 billion for the first quarter of 2014. Inflation rate also came down to 7.25% in the month of April 2014.

The country now appears to be bouncing back by regaining investor confidence in its economy. From being the world’s worst performing currency in 2013, the Rupiah has been strengthening against the US dollar. Indonesia is also battling hard out of the ‘Fragile Five’ tag (those emerging markets perceived to be most vulnerable to the US Fed’s tapering).

Strong domestic demand and consumption from a growing middle class have also helped the growth spurt in the Indonesian economy. The on-going stabilization policies and efforts to improve the investment environment are expected to reap benefits from 2015. According to the Asian Development Bank, Indonesia’s GDP growth is likely to be 5.7% in 2014 and move back to 6% in 2015.