The Resilient Australian Economy
Australia has been one of the few developed nations to remain largely unscathed by the global financial crises of 2008 – a crisis, which has left in its wake seemingly intractable problems of unemployment, large government debts, financial fragility and political unrest in Europe, Japan and North America (McAuley 2012). This would be further explored in the essay.
Composition
The Australian economy faces new challenges like the high exchange rate of Australian dollar that has impacted the international competitiveness of its trade activities, mainly manufacturing. Another long-run challenge the economy faces is the dependence of Chinese economy, as they are major trade partners. The future will depend on how the Australian economy prepares itself with corrective/reactive policy measures, trade agreements, and innovative strategies to keep Australia’s dream run of prosperity.
Chart 4: Industry Value Added and Employment, 2014
Source: ABS
The Chart 4 shows the composition of Australia’s economy with the value added by each industry in the year 2014. Though mining still enjoys a high contribution to the economy, it is on a slow decline and will continue declining as the composition shifts. A variety of factors can affect the decline such as depletion of natural resources, climate change and change in strategy by the government. The technological know-how & progress along with high exchange rate has had an impact on the composition. Thus,
Australia’s economic status can be assessed using a range of economic indicators such as unemployment rates, Gross Domestic Product (GDP), inflation rates and interest rates. The economy can affect Australian business’s greatly causing them to flow through the business cycle. The business cycle purpose is to describe the overall trends of the economy and can show growths of high or negative. The four stages in a business cycle are: expansion, this is when the economy has high demands; peak, this is the turning point of the expansions before the economy falls down. A contraction is when the demand for goods and services are low; and trough, is the opposite of a peak. To evaluate Australia’s current economic status factors such as unemployment
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 world price of Australia 's mining exports has more than tripled over the previous decade, while investment spending by the mining segment expanded from 2% of GDP to 8%. This mining speaks to one of the biggest shocks to hit the Australian economy in generation. This paper endeavours to evaluate some of Australian economics’ effects to the mining industry, utilizing top-down analysis of the Australian economy. It will demonstrate the mining has significantly expanded Australian living standards.
The decline in the CAD has been affected by what is happening to the nation’s levels of saving and investment. The level of Australia’s national
Australia’s lack of international competitiveness as a result of geographical location and small population, as well as the decline of the manufacturing industry to overseas low cost producers, with the problem being further increased by the high AUD exchange rate, as a result of the mining boom. The fall in domestic production has led to an increase in imports and a fall in productive innovation compared to advanced economies has led to a rise in CAD.
The impact of globalisation has also changed the structure of Australia 's trade. There has been considerable growth in manufacturing and service industries with limited growth in the rural sector (Table 2). This reflects a combination of changes in world demand and domestic structural reforms.
The source above displays Australia’s top 10 exports to China form 2001, and 2011. We can observe that in just ten years the trading links between Australia and China have grown much stronger. We can see that in 2001 Australia sold $1,369 million AUD worth of iron ore to China. In just ten years, that Australia is now selling 32 times that original amount. We can also see an increase in not just iron ore, but in all the other goods and services displayed in the source. This shows in general that Australia’s export links have strengthen over the years
The world price of Australia’s mining exports has more than tripled over the past decade, while investment spending by the mining sector increased from 2 per cent of GDP to 8 per cent. This ‘mining boom’ represents one of the largest shocks to hit the Australian economy in generations. This paper attempts to quantify some of its effects, using top-down analysis of the Australian economy. It will show the mining boom has substantially increased Australian living standards. By 2016, we estimate that it had raised real per capita household disposable income by 13 per cent, raised real wages by 6 per cent and lowered the unemployment rate by about 1¼ percentage points. There have also been costs. The boom has led to a large appreciation of the Australian dollar that has weighed on other industries exposed to trade, such as manufacturing and agriculture.
Suggesting any economic or policy reforms to the Australian Economy requires us to understand the evolution of an economy and the factors effecting it both intrinsically and globally.
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
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.
Asia Pacific Economic Cooperation (APEC) is the pre-eminent economic rally in Australia’s region. APEC’s goal is to drive an extensive trade and investment liberalisation and facilitation agenda. It is focused on structural reform as a means of raising competitiveness and the efficiency of trade and investment flows. It has helped Australia with building and strengthening ties with other countries such as Brunei, Singapore, Philippines and other countries in the region. In 2009, 70% of Australia’s trade is with APEC countries.
Many of Australia’s import partners consist of some of the largest traders in the world, such as China and the United States. Trade in Australia is considered very important and beneficial to the economy, thus making it a smart move to expand business to Australia.
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.
Australia’s main trading partners are China, Japan, the United States, Republic of Korea and Singapore. Nearly half of Australia’s trade activity in terms of imports and exports are with these 5 countries alone. Particularly with the recent growth of the Chinese economy, Australia’s chief trading partner, the country has seen growth in its exports. However very recently the growth of the Chinese economy has been slowing which is a risk to Australian exports.