HAMISH MCRAE: Let us pray for five productive years under the Labour Party

We know who will be in charge for the next five years or so, and we can make some educated guesses about what they will try to do. But we also know that our daily lives will be shaped as much by global economic events as by government policies. After all, the big rise in inflation was a global phenomenon.

So what are the big forces that will dominate the world economy for the rest of this decade and that the new administration will have to deal with? Here are my top five: the first and last are broadly positive, and the three in between are, to varying degrees, negative.

First, there is a global economic cycle, with growth phases interrupted every ten years or so by a recession. Based on past experience, we are in a period of decent growth that will allow us to survive for several years.

The next such recession, perhaps a severe one, will probably come in the late 2020s. So the government has a few years to put things right, years that it should use wisely.

One of those issues, the second, is public debt, which is just below 100% of GDP, the highest since the early 1960s, when we were still paying the cost of the Second World War.

By international standards, it may not seem so bad. It is the second poorest country in the G7 after Germany, but it needs attention. Taxpayers around the world have to pay interest on it, and ideally we and other countries should start to reduce the figures.

Thus, although in the coming months interest rates will fall slightly in line with inflation, in the medium term there will be a combination of fairly high interest rates and a contraction of public finances.

Third, this constraint will be exacerbated by the need for additional public spending in two areas: aged care and defence. Populations in every country in the developed world are ageing, and regardless of how we and others respond, that will mean more resources will be devoted to health care, pensions and so on.

As for defense, the world will be at least as unstable over the next five years as it has been over the past five. I fear there will be no “peace dividend,” no matter what happens in the current conflicts. Money spent on national security is money that is not available for other things, and we can only hope for calmer times by the end of the decade.

Fourth, globalization will remain under pressure. Trade barriers between the United States and China are likely to rise, although we should all hope that the world’s two largest economies will avoid a full-scale trade war. The shift in economic weight between developed and emerging economies, particularly India, is inevitable and will create further tensions.

But it also seems likely that financial markets will remain global, money will continue to flow across borders and international trade in services will continue to boom. That may put the UK in a fairly strong position. It is the world’s second-largest exporter of services. But trade disruptions are never a good thing and we risk being caught in the crossfire.

Finally, one clear positive aspect: technology will continue to advance at full speed, which can bring enormous economic benefits. We will never be able to see in detail which technologies will triumph and which will disappear, but more importantly, what the economic consequences of the winners will be.

The general argument – ​​that generative AI will be hugely important for increasing productivity in service industries, including government services – is undeniable. This will be the decade when AI really changes things.

The challenge is to use it well, regulate it sensibly, but allow innovative uses of AI to flourish. Closer to home, the Government needs to use the technology to boost the appalling productivity of our public services, which is lower than it was in 1997, when Labour last came to power, and which fell under the Blair and Brown governments.

It’s a mixed bag, with huge challenges but also plenty of opportunities. Let’s hope Labour doesn’t screw it up.