Memories of the disorders related to the great state intervention in the 1970s have faded, and the concept that government is the solution to the ultimate disorders is increasingly prevalent: regulation, taxation, spending, or school campaigns.
The pandemic has strengthened aid for a “bigger” government: showing the strength of government to protect families and businesses from crises; perceptions of inequality; and add help to the concept that governments deserve to protect supply chains by bringing production home. Added to this is the preference of governments to elect and subsidize the “winners” of blank force.
At the same time, higher public debt means: less flexibility to respond to a crisis with fiscal stimulus; a greater incentive for politicians to inflate their exit; and interest bills account for a significant portion of tax revenue.
After the pandemic, hard-work markets contracted, reflecting the rebound in demand due to the pandemic, declining participation rates in some countries, and some retention of hard work, as a shortage of hard work made workers reluctant to lay off workers.
As a result, wage expansion has accelerated, ending the pre-pandemic malaise of weak wage expansion.
The pandemic has triggered both: supply-side disruptions have increased pressure to relocate production; confrontation over the origin and control of the coronavirus; this has heightened tensions between the West and China; And it turns out that this has contributed to nationalism and populism.
Thus, the days of lax global industrial agreements and declining defense spending are long gone. Instead, we are seeing more protectionism (e. g. , with subsidies and regulations favoring local production) and increased defense spending.
Implications: Globalization is less likely to lead to lower prospective economic expansion for emerging economies and reduced productivity if source chains are controlled for non-economic reasons. And, combined with intensified geopolitical tensions leading to increased defense spending, this may simply result in a world being more prone to inflation than before.
Inflation is now starting to ease as financial easing and increased spending have reversed and the fountain has moved back forward, but the pandemic has most likely ushered in a more inflation-prone world by: strengthening the “bigger” government; as well as a reversal of globalization; and heightening geopolitical tensions. All of this, combined with an aging population, can lead to higher inflation.
Implications: Higher inflation than before the pandemic means higher interest rates than otherwise in the medium term, reducing the bullish outlook for expansion assets such as stocks and real estate.
In addition, lockdowns and runaways have led to an increase in demand for homes rather than complexes and an interest in smaller cities and regions. As a result, Australian asset prices have reached record highs. The fall in emerging interest rates over the past two years on space costs has been outweighed by housing shortages as immigration has surged to catch up.
The end result is now a record point of housing affordability for buyers (who are hit by a double whammy: higher costs relative to income (see chart below) and higher loan rates) and renters (who have noticed rents rising).
A British study of more than 2,000 companies is revealing. It shows that while around 90. 8% of painters were completely on-site in 2018, this figure dropped to 62. 3% last year, with 30. 2% in hybrid situations (painting in the workplace and from home). Similarly, the ABS found that 37% of people hired in Australia work from home.
Of course, this masks a wide diversity of industries in which a higher proportion of computer-powered staff work longer hours from home. And corporations expect it to stay that way. There are huge benefits to working in physical combination around culture, collaboration, concept generation and learning, but there are also benefits of running from home with no commuting time, with greater concentration, less damage to the environment, greater balance in life and for companies: reduced costs, a more varied and happy matrix.
So a hybrid design is ideal. The proportion of employees in a hybrid design could even increase as startups adopt remote paints more quickly.
It can be argued that this more comprehensive adoption of the generation will unlock the full prospect of improvements in the productivity of the generation. Immediate adoption of AI will most likely help.
Therefore, a return to pre-pandemic inflation and ultra-low interest rates is unlikely. However, it’s not all negative: apart from the faster adoption of technology, the global and Australian economies have outperformed the last four years in a much greater way than one would have imagined at the beginning of the lockdowns!