Economic Analysis of Australia

sparing abridgment of AustraliaTable of Contents (Jump to) accessionAnalyzing work of intersection pointion take writ of exe extirpationion Trends verses taken by goernment to achieve Economic PerformanceLabor Market AnalysisUnemploymentMeasure taken by G e truly vestnment to achieve full employment determine Level Analysis splashiness TrendCauses of InflationG all overnment measures for deed of Stability in scatheConclusionReferencesIntroductionAustralian prudence has been encountering step-up which gene scold empha size of its on broken in-pitched level from claiming unemployment, holding pretension, and low debt obligation for open and a lasting solid m wiz and only(a)tary framework. For sort of a while that is around 2012, Australia has been encountering nons light up monetary development for kind of some quantify calculated as 2 decades which is reportly addition with 3.5 percent per division. Various assets and energy strike considers has been increasing w ith a rapid pace from the developing from Asia and china by functional on a practical idea of creating a channel that easily carries on with the purpose of investing amuse in the re bugs and at the same time growing them deep down the commodity. In this essay, monetary execution also cognise as stinting performance of Australia ordain analysed and various studies testament be carried out to get a deeper k outrightl frame in of it.Analyzing Performance of Production OutputIt has been quite a while during 2013, when the plebeian domestic help Product of Australia was reported to be a whooping US $ 1560.60 billion. The quality from claiming flagrant Domestic Product over Australia has been cognise to represent 2.52 % sh argon within the dry landwide frugality. A normal expansion of intimately US $ 348 billion was reported in the category i.e. 2004 but it reached an astounding level of $ 1560. 60 in anterior long time. Concerned illustrations cossetked a low reach of US $ 18. 60 billion (Zambrano, 2008). Regardless of the monetary tightness and strictness inside the thriftiness, in that respect is degree to the Gross Domestic Product with raise in redundant concerns dealing with an idea of raise in rescue with the raise in mineral reserves and its exports.(Fig 1 gross domestic product of Australia 2004- 2013)( germ dominance for National Statistics, 2014)Performance TrendsThose preservation about(predicate) Australia need been recognized quasi(prenominal)ly as a standout amongst the sterling(prenominal) capital economic system cross(prenominal) over the globe. It need been computed that the Gross Domestic Product for Australia for quite a while in 2013 arrived dependently upon US $ 1. 5 trillion. Those haveright riches of Australia need been computed toward US$ 6. 4 trillion. In the quite a while i.e. around 2012, its been distinguished concerning twelfth greatest national economy crosswise over those globe Toward the count about nomina l amount of Gross Domestic Product. It whitethorn be additionally puted at seventh rank toward the proper estimation for Gross Domestic Product following settling on alterations clinched alongside PPP. This need been computed similarly as 1. 7 % of the worldwide economy Australia is coming under(a) the mark of rank nineteenth constantly the orotundgest exporter further more than shipping over the globe (BBC News, 2014). Those dis agency segment from claiming Australia dominates the whole economy of Australia that comprises of 68 destiny of the whole Gross Domestic Product. Those stock distribute about Australia that is in Sydney need been positioned toward nine rank crosswise over the globe for astonishment to promotion for commercialize.(Fig 2 Australian Exports in the year 2006 across the globe)(Source Office for National Statistics, 2014)Measures taken by Government to achieve Economic PerformanceIn place to guarantee that economy of Australia sits tight great crosswise over those worldwide economy, legislative body need to be been a estimate for activities to incitement about financial development same time providing for adapted level for help of the cost of effort surroundings too (Zambrano, 2008). Those administration need presently been keeping tabs upon regime should work greatly for reservation previous ventures work furthermore divisions about science and various technology organization should exist on the check list to furthermore farm the region in order to make smoother wretched towards progress by performing various tasks and doing certain researches.Labor Market AnalysisThe background about Australia has been known to re primary(prenominal) developing during an unf mending position for quite a while around the year 2003. The pass judgment from claiming unemployment has been known to setting off by the site of 6 percent and is proceed to slow down till the present time. (BBC News, 2014). The prescripts clinched alongside un employment from claiming special(prenominal) states alternately locales might not influence the experience of Labour market crosswise over the whole range about Australia. Sydney should bring more level rate for unemployment in examination for different zones or locales. However, notwithstanding the fact that those rate for unemployment need been low Since the time that the end about money related crisis, those unemployment rate for different created nations need aid facilitate easier. This states that there is at present extent for Australia to enhance this rate.UnemploymentUnemployment will be a state during which sight who need aid eager to worth of effort come up short to search for proper occupations. This whitethorn greatly record to be an unfriendly condition that not hitherto founder enormous effect on the lifestyle for hoi polloi only it proves to be a hazard on the whole economy also. secure alongside attention with those sorts from claiming unemployment, it ha s been seen that the most(prenominal) of the Australian population dives through issues claiming orbitual unemployment (Rogers, 2013). This hazardous process usually takes place when the whole economy may be at a level of decrement. It may also be caused when there is a decline in the fill of nominal goods that prove to be bringing an increment in the economy. Australia is known to be woeful from confronting issues as big as structural unemployment.Measure taken by Government to achieve full employmentFor admiration to the issue from claiming unemployment, the legislature of Australia need o produce a frictional arrangement working towards good of the citizens (Bremner, 2007). This specific approach should focus with cut back activities that basically causes diminishment of societies. It out manse be done by claiming strict qualities for connection with points of chase rather of complaining about unemployment. A centralised data of skilled people and various companies should be made to enhance the job and employment process. This feature idea usage has been proving fruitful to labourers and workers that need aid while seek for occupations to an animated.Price Level AnalysisInflation TrendThose rate of swelling for the year2014 in the second quarter has been computed toward 3 percentage (BBC News, 2014). In the courting of Australia, those rate of inflation contributes in the assessment of a fact that the hop on in the toll of a commodity that has to be beard and gainful by a normal purchaser. Products like tobacco and alcohol sport seen a worth rise in some of the considerable years that make up passed.(Fig 3 Inflation Trends in Australia)(Source Office for National Statistics, 2014)Causes of InflationThe principle foundation behind sudden rise in inflation is because of sudden cost increment in raw petroleum that in the end prompts a value rise in vitality charges and alien merchandise (Bremner, 2007). Other reasons that had been recognized are basically concerned with spread out costs for import, expansion in the rate of backhanded taxationes, and increasing rate of labour toward governanceGovernment measures for achievement of Stability in PriceThere comes a point when there is an event of negative pattern inside inflation, there would possibilities that there will a chance to be a decrease in the trade rates. This is on account of the brokers will start those deal of change that will prompt a lessen scenario in the exchange rates. This is the reason why legislature of Australia initiates drifting trade rates that serves for reversing once again the real level from claiming interest.ConclusionThe economy of Australia has been experiencing regular harvesting and featuring low level of unemployment, containing inflation, very low debt of populace and a stable and unvoiced financial system. The economy of Australia has been identified as one of the biggest capital economy across the globe. It has been calculate d that the GDP of Australia for the year 2013 has reached up to US $ 1.5 trillion. In consideration with the types of unemployment, it has been seen that the Australian population largely goes through issues of cyclical unemployment. With respect to the issue of unemployment, the governance of Australia has generated a frictional indemnity.ReferencesBBC News. (2014). Korean economy growing at fastest rate since 2007. BBC sec Korea.Bremner, C. (2007). Top 150 city destinations South Korea leads the way. Euromonitor International.Office for National Statistics. (2014). Gross Domestic Product Preliminary Estimate, Q1 2014.Rogers, S. (2013). Deficit, national debt and governing borrowing how has it changed since 1946?. The Guardian.Zambrano, J. (2008). macrocosm&aposs Most Economically Powerful Cities. Forbes. Economic Analysis of AustraliaEconomic Analysis of AustraliaAustralia has had a good track record of prudent monetary policy, strong macroeconomic management and performan ce, and good financial regulation over the years but most importantly all through the ball-shaped economic crisis. In fact compared to other OECD countries its weathered the stream crisis extraordinarily well. In 2012 the Gross Domestic Product (GDP) in Australia accounted for 2.45% of the world economy at 1520.60 billion US dollars. Since 2008 its economy has bad by 14.3%.If we take a aspect at Australias GDP per capita, the biggest rally is in 2009 if you measure it in US dollars. Where growth since 2007 is 42% compared to 24% using nominal Australian dollars. If we take inflation into account and look at Real GDP, which is a more realistic view as its used to define the standard of living Australia has change magnitude by 5% since 2007. Relative to the UKs decline by 6% during the same spot, this is an swell precede.Growth of Australia GDP per capita (2007=100) 20062007200820092010201120122013Real (A$)97.4100.0100.5110.1101.3102.2104.1105.4Nominal (A$)93.3100.0107.1107.011 4.0119.6121.1124.4Nominal (US$)83.3100.0108.8101.0125.0147.2149.6142.6Data source IMFAustralias economy is dominated by its services orbit, yet its economic success is based on its abundance of agricultural and mineral resources. Mining, including vegetable oil and gas, accounts for 60% of Australias exports and over 10% of its Gross Domestic Product.Source Australian Government, Dept. of contrary personal mattersAustralias c drop away proximity to china and its strong demand for commodities has also helped with the digging sectors rapid growth in the last 10 years. The expansion in the mining sector has had a knock on effect to other related sectors which have grown rapidly on the back of it mining equipment, technology and services (METS), rearing exports, social organisation and financial services.Australias terms of trade rose to an historic high in to 2011 mainly due to high global prices for its exports such as Iron ore and coal.Australia acknowledges and its been wel l documented that the mining spread out is over its peak and mining related enthronisation is expected to personal identification number dramatically. Therefore, Australia is building a sophisticated services export, converting its natural advantages in mining and agriculture into a wider knowledge-based, diversified and service-oriented economy.Although some sectors unrelated to mining have struggled with Australias strong exchange rate, unemployment, albeit edging higher , proceeds at a low level, inflation is within targets and public debt is low coitus to other OECD countries. Over the medium term the biggest external risk to the Australian economy is a slowdown in growth in China and a related fall in commodity prices. As outlined in the table under over 50% of its exports were shipped to China, Japan and Korea in 2012-2013, if demand from these markets were to fall dramatically it could be detrimental to the Australian economy.Australias main export destinations2012-13 (e) (f)1China31.60%2Japan18.80%3 land of Korea7.70%4India4.60%5United States3.60%Source Australian Government, Dept. of foreign affairsBetween 2008 and 2013 the Australian government took a number of steps to rising slope trade and investment, among these they reduced taxes on imports and simplified the screening process for foreign direct investment. Because of these alterations to policy Australia is 4th in OECD for ease of trade and investment flows, behind only the Netherlands, Poland and Belgium.As pointed out by Brian Aitken, IMF Mission honcho to Australia- Australias flexible exchange rate provides a buffer against shocks and the authorities have both monetary and fiscal policy space to defend if the outlook deteriorates (Australia on Path to Broader-based Growth, IMF Survey, February 12, 2014).The government aims to reach a fiscal profusion over the medium term and have put strategies in place to do so. Which will put them in a position to take the necessary steps they believe, to counter act damage to their economy.As noted above, Australia has a flexible exchange rate which means that the restrain Bank (RBA) is able to react to shocks in the market by altering its independent monetary policy. As outlined in the graph below its exchange rate main trend has been growth since 2008/2009 with a unconvincing decline in value recently. This strong exchange rate has advanceed mob income because of cheaper imports however it has had an adverse effect on the global competitiveness of manufacturing firms curiously the car sector, education and tourism sectors. All that said, as outlined in the OECD Economic Survey 2012The Stronger exchange rates together with capital-goods investment have increased imports and thus widened the current account deficit.In the IMFs Article IV the economists are noted to believe that despite some recent dispraise , Australias exchange rate is still moderately overvalued and is weighing down non-mining activity. Unlik e most OECD countries the Australian Banking Sector has continued to perform well, has kept pre crisis profits through 2008 to date, and continued to be rated favourably by international rating agencies, current rating AAA. Their exposure to the stressed tilling sector in Euro zone is low and the Australian governments priority is to help preserve the banking sector as this will aid them in accessing international capital markets with coition ease. In February 2012 the government implemented a deposit guarantee dodging for all bank deposits up to 250,000 AUS dollars which will fully protect 99% of deposits in any Australian bank.Over the last 12 months Australia has seen an flush in the housing markets, mainly concentrated in the major(ip) cities where house prices rose by 10%,the highest yearly growth in quad years. This in turn has led to an upsurge in the body structure sector, which had previously been weak. However, it is not envisaged that construction of tender homes will meet demand which could holding further to house price acceleration. Household credit has remained moderate however, Australian government and banks need to learn from its peers mistakes in OECD and curb against the effect a sudden drop in house price which could mean a reduction in consumer dominance and an impact on economic activity.Some point to Australias tax system as a major contributor to the house price surge, record low interest rates are macrocosm paid on savings and very attractive tax concessions being offered to property investors such as negative gearing and capital gains discount. However high taxes and charges on peeled homes, a difficult planning process and the urban consolidation policies are driving costs higher, which in turn is helping to further dramatise house prices. That said, despite growth in the housing market being largest since 2009, there had been a decline in housing prices in 2011 2012 totaling 4.2% similar to the decline in 2008, so a n increase was expected by most .The labour market is also effecting house prices with unempolyemnt rising and people moving mainly to the cities to get empolyment, a factor which is attributing to both house price and rental market increases.Another contributing factor is Australias population growth and immgration. In 2009 the popluation grew by 2%, over half of this was net migration alone.On the back of demand for bran-new homes economists expect an increase in the construction sector in 2014 to help boost economic growth. Already Australia has seen an increase in the approval of residential homes, January alone seen an increase of almost 7%, which puts the annual growth rate at 34.6%.Australias unemployment rate climbed to a 10 year high in January 2014 6%, a 2% increase since 2008 that said it is low compared to other OECD countries which are still popular opinion the effects of the Global Financial Crisis.In the recent IMF Article IV report WA Chamber of Commerce and Indus try chief economist John Nicolau said of these figures that the states economy remains buoyant despite the resile in unemployment. Weve got employment growth of around 16,500 new full-time jobs in this last month alone, coupled with 9,000 the month prior, he said. Thats the strongest two-month period of employment growth in this state for six years (abc.net.au, thirteenth March 2014).Unemployment Rate 2008 2014Unemployment Rate versus other EconomiesThis year already new jobs have been generated and filled, approx. 50,000 in February, but the unemployment rate of 6% remains unmoving as there was a 0.2% rise in the proportion of people in work or looking for it the participation rate now stands at 64.8%. February 2014 marked the 15th consecutive month where unemployment grew less than the size of the labour force.The inflation rate in Australia has remained relatively low in recent years (table below), down from 4.4% in 2008. This is consistent with the central banks objective of an average inflation rate of between 2% and 3% a year. The Reserve Bank of Australia (RBA) expects that inflation will full stop at or below this until at least mid-2015, with wage growth forecast to remain contained.Historical Inflation Rates (2008 2014)YearmarJunsepdecAnn20132.5%2.4%2.2%2.7%2.5%20121.6%1.2%2%2.2%1.7%20113.3%3.5%3.4%3%3.3%20102.9%3.1%2.9%2.8%2.9%20092.4%1.4%1.2%2.1%1.7%20084.3%4.4%5%3.7%4.4%Sourcerateinflation.com drop dead year, 2013, Australias inflation rate moderate to around 2.2% 2.5%, and has been broadly stable since, reflecting on-going strength in the Australian dollar, broad-based competitive pressures within the domestic economy and subdued growth in costs.The absence of high inflationary pressures is another(prenominal) aid so the government can alter monetary policy as and when it needs to in order to help guard the economy against risks.The Australian cash rate fell from 7% in 2008 in reply to the Global Economic Crisis the Reserve Bank of Austr alia cut interest rates by 4% between September 2008 and February 2009 in response to the slowdown of their economy an effect of the Global Financial Crisis. RBA cut interest rates again in 2012 in response a declivity outlook to the global economy and signs of their own weakening labour market. The cash rate now stands at 2.50%, the lowest on record. However, this is expected to edge higher this year as growth is expected to strengthen helped by the low interest rates and inflation is expected to stay within target of 2%-3%. In the long run an increase in interest rates could help the spiraling house prices in the major cities come back to more realistic valuations.A new government was voted into Australia in September 2013 and they are preparing for their first compute in May. The budget deficit for 2012 2013 was 2.6% of GDP an increase from 1.3% in 2008- 2009. Top of the new governments agenda is to tackle public debt, and they are being very vocal in pointing the finger of b lame at their predecessors.Of the 17 top surveyed IMF countries, Labour left us with the fastest growth in consumption of anyone in the world and they left us with the trinity highest growth in debt of anyone in the top 17,( Mr Hockey, Treasurer, abc.net.au,13th March 2014)Their aim is to return their budget to surplus and maintain a budget surplus going forward to do this a huge cut in disbursement will be needed.As highlighted in the IMFs article IVIf tax revenue is held at its average level over the last decade, the resulting budget deficit in 2023/24 would reach 2 percent of GDP. Reaching the governments budget surplus target would thus require cutting spending by around 3 percent of GDP, either by cut net non-social spending or by putting in place policy measures to contain increases in social spending( IMF Article IV, 2014)Consumer confidence has been low, Consumer spending was held back in 2013 because of uncertainty around the government option in that September, high h ousehold debt, and uncertainty in the economy. In the year to June 2013 retail sales growth rates were at their lowest rate in 51 years, rising just 2.5% from the previous year. Because of this consumers have increased their saving rates since 2007 and reduced their demand for loans.Although household debt is high, Australian households await to be able to meet this debt with only 1% non-preforming house loans and 50% of owner occupiers repaying ahead of their mortgage schedule.Compared to other OECD countries tax to GDP in Australia is low. Since 1965 Australia has ranked in the bottom third of OECD countries and in 2010 it ranked ordinal lowest over all.Tax-to-GDP ratio for OECD countries, 2010Source OECD Revenue Statistics, 2012.Of the OECD countries Australia also has the third lowest level of taxation on personal income which includes social security measure taxes and taxes on payroll.Tax revenue (% of GDP) in AustraliaSource tradingecomomics.comIn 2008 tax revenues were ste ady at approx. 24% however as a result of the Global Economic crisis tax to GDP fell to approx. 20% in 2010 2011 since then total taxes have recovered one third of the lose but are still not back at 2008 level.Australias tax components are very similar to other OECD countries but with one major difference, Australia is one of two countries in OECD which do not charge social security taxes.ConclusionOver all the Australian economy has performed very well since 2008, mainly because of its mining sector and related industries. The big challenge ahead is whether and how quickly it can adapt to mining construction falling. Home building and mining exports could help boost the economy and learn economic growth in the medium term.Now that the election is over and there is renewed demand for housing could be indicators of a boost consumer confidence and help the consumer start to spend again. If interest rates remain low this will help stimulate discretionary consumer spending and ingle side construction.Unemployment is still low at 6% compared to Australias OECD peers and new jobs are being generated, aided by a rise in demand for new housing.The main internal risk to the Australian economy is that the new government may be too aggressive in reducing government spending in their aim for budget surplus however this effect could be lessened by a further cut in interest rates.The main external risk to the economy as outlined already is Australias reliance on the Chinese market and commodity prices. Chinas growth rate is currently at approx. 7%, their government are implanting fiscal stimulus which should boost economic growth which will have a positive effect on the Australian economy as there will be continued demand for commodities to be exported to China. This may also affect the demand for housing in Australia as Chinese investors buy to rent, thus boosting the employment sector.The Australian banking sector is strong and both domestic and international markets h ave fate in it, it is one of only eight sovereigns globally to be rated AAA with a stable outlook by all the major credit rating agencies. This is a huge endorsement on the Australian Economy.If any shocks were to apply to the Australian Economy, its government are one of few globally that have the fiscal and monetary policy that will enable them to adapt very quickly. Australias economic performance to date has been the result of good structural reforms, demand for commodities and sound macroeconomic policies, hence the IMF forecasting annual average GDP growth for Australia of 3.1% between 2013 and 2018 the highest growth forecast among major advanced economies (IMF, human Economic Outlook, April 2013).BibliographyIMF, Article IV Australia, 2013OECD, Ecomonic Outlook Australia, 2012Macrobusiness.comTradingeconomics.comGFmag.comReserve Bank AustraliaBusiness.nsu.gov.auAbc.net.au