Macroeconomics And The Current Economic Situation

This report will show an overview of the current state of the Australian economy and its management by the Federal government through examining economic indicators such as economic growth (GDP), unemployment, inflation and trade.

The figure obviously had not return to pre-crisis level. Moreover, recent commodity prices had fallen significantly which will affect Australia’s short and long term economy.

1. If an economy produces final output worth $5 trillion, then the amount of gross

The Australian PMI has been mostly below 50 with an average of 47.98 in past 12 months and an average of 47.94 this year, which suggests a likely contraction in manufacturing. Fluctuation is expected due to its volatile nature but a large percentage change is likely to drive the economy. A 14.03% growth in July is expected to lead to an increase in the coming month but contraction may continue in 2015-2016. From these PMI figures, Australia’s economy might not be performing at its best. The industry might suffer

Unemployment: As can be seen in Fig 3 below, the unemployment rate in Australia has recently dropped below 5.8%, which is the lowest it has been for over 20 months. This is despite the economy struggling over the previous 12 months due to a fall in investment in the mining industry. This has led to the Reserve Bank of Australia (RBA) reducing interest rates on two occasions in the past 12 months to encourage the non-mining sectors of the economy to fill this void and invest in resources, but some businesses are still reluctant to spend money. NAB economist Tapas Strickland said he expected strong jobs growth to continue into 2016, stating “ The forward indicators, such as jobs ads, suggest employment growth of 2% a year, and when you do the calculations, that implies 20,000 (jobs added) per month”. (Guardian, 2015).

• As previously stated in the executive summary, the United States’ economy is currently stagnating. From week to week we may see a rise in one indicator while there is a fall in another indicator, but none of the rises or falls are drastic enough to have an overwhelming impact on the economy as a whole. Although the economy is not near as strong as it was before the 2008-2009 recession, arguably one of the biggest economic crises of the past decade, there has been much growth and strength throughout the past few years with this year being the first year in which the economy is in somewhat of a holding pattern. I believe, that even with the little growth and movement of the United States economy over the past year, it is still perhaps one of the strongest economies in the world at the moment.

Within Australia’s current economic climate, a lower exchange rate provides more economic advantages than a high exchange rate. However, some experts argue that a higher exchange rate is overall beneficial for the economy through having an increased purchasing power, whilst others disagree. By having a lower exchange rate, a country is able to accelerate its exports industry, making exports cheaper abroad, in turn increasing demand for their goods. This report will discuss the recent trends in Australia’s exchange rate, in addition to exploring factors that influence the exchange rate and its impact on the trade industry. The effects of a depreciating

Those who argue that the ending of mining is not the ending of the economy and that the construction investment could offset the mining sector slump may be misled. They, together with those who assert that the ongoing fiscal and monetary stimulus have ample powers to lift the economy should clearly realise the following: the plunge in mining investment, the down turn in construction industry, the restriction in fiscal and monetary actions all signal that the Australian economy is sliding to sluggish. This low growth condition will continue for several years to come; it seems there is no room for

The Australian economy has continued to grow at a moderate pace and activity is rebalancing away from the resources sector towards non-resource sectors. Even though the available data suggest that GDP continued to grow at a below-trend pace over 2016, employment growth was above average and the unemployment rate fell by around ½ percentage point. In part, employment growth appears to have reflected the relatively strong growth of output in the more labour-intensive sectors of the economy, such as household services. Growth of goods-related production has picked up more recently, but remains modest overall.

With a GDP of over $1 trillion USD, the Australian economy is among the largest in the world (Cornett and Saunders, 2014). Australia is trading partners with the United States, China, and Japan, but their economic ties are mainly centered in the Pacific Rim. Exports are crucial to the country’s GDP and this has created problems regarding sustainability in the Australian economy.

The structure of Australian economy has continuously evolved over the last century and it continues to do so. In last century, there was a shift in the economy from manufacturing and mining sector to service sector. Firms in Australia have continuously innovated along with the boom in Information technology and have grown bigger in this digital era. Now, with increasing world demand for commodities especially from India and China, the stage has been set for Mining sector to rebound.

This means that the further decline of cash rate is required to support the spending and investment of business sectors. Although mining investment and business confidence remain low, investment in dwelling represents a positive sign for the economy (RBA, 2015b). In addition, the forecast of National Bank of Australia on March (2015) expected that “dwelling investment [will increase] by 2.6 % within quarter 4 in 2016” and “much stronger growth of 12% and 7% over 2015 and 2016 respectively” (p.11). Regarding to the favorable trends of dwelling investment, it is believed that dwelling investment can be compensation to the decline in mining investment as the resource can be

The industry is marked by Low revenue volatility and medium regulation level. Although industry globalisation is a critical stage and poses a major threat. However over the last five year the industry has boomed due to increase in consumer expenditure , after the recovery of Australian economy in 2010 the industry has started to positive upturn. The industry is expected to grow at annualized 3.3% to a total of $771.3 million.

The second key national interest of Australia is the economy. Australia’s capital, jobs, standards of living, technological innovations and social advances rely substantially on exports and commodity values within Southeast Asia and the Pacific (Department of Foreign Affairs and Trade 2016a). The stability of South East Asia and the Oceania

There are three major economic factors that have combined contribution to FMG’s growth over the past 5 years, including the strong AUD , the amazing export feature due to the Chinese boom which drives up the commodity price and the interest rate decision by RBA. Australia dollar has appeared strong for the past 5 years and maintained at $6-$6.8 level for AUD/CNY at most time. It promised a high level of foreign income for Australia exporter. In 2009, China demanded almost 60% of the world’s iron ore to produce 47% of world’s steel production. It contributes the most to the price rocket from $31.78 to $180.6 US cents/mts in 5 years time. In addition, Australia borrowing cost remains high over the past few years which may alter the finance decisions of FMG.