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ME-II
Project on Australian
Economy
BY:
RISHU NANDESHWAR (15004)
MOHAMMAD TALHA (15049)
1
Table of Content
1.
Introduction ....................................................................................................
.2-4
2. Australian Government
Policy ..........................................................................5
3.
Objective .........................................................................................................
..6-7
4.
Methodology ....................................................................................................
.8
5. Economic Analysis of
Australia.........................................................................9-19
6. The Current
scenario ........................................................................................20-24
7. SWOT
Analysis ..................................................................................................25-26
8. Analysis and
Findings ........................................................................................27-32
9.
References ......................................................................................................
..33
INTRODUCTION
Australia officially the Commonwealth of Australia is a country comprising the mainland of
the Australian continent, the island of Tasmania, and numerous smaller islands. It is the
world's sixth-largest country by total area. Neighbouring countries include Indonesia, East
Timor and Papua New Guinea to the north; the Solomon Islands andVanuatu to the north-east;
and New Zealand to the south-east.
For at least 40,000 yearsbefore the first British settlement in the late 18th century. Australia was
inhabited by indigenous Australians,]who spoke languages grouped into roughly 250 language
groups. After the European discovery of the continent by Dutch explorers in 1606, Australia's
eastern half was claimed by Great Britain in 1770 and initially settled throughpenal transportation to
the colony of New South Wales from 26 January 1788. The population grew steadily in subsequent
decades; the continent was explored and an additional five self-governing crown colonies were
established.
On 1 January 1901, the six colonies federated, forming the Commonwealth of Australia. Since
Federation, Australia has maintained a stable liberal democratic political system that functions as
a federal parliamentary democracy and constitutional monarchycomprising six states and several
territories. The population of 23.6 million is highly urbanized and heavily concentrated in theeastern
states and on the coast.
Australia is a developed country and one of the wealthiest in the world, with the world's 12th-largest
economy. In 2012 Australia had the world's fifth-highest per capita income. Australia's military
expenditure is the world's 13th-largest. With the second-highest human development index globally,
Australia ranks highly in many international comparisons of national performance, such as quality of
life, health, education, economic freedom, and the protection of civil liberties and political rights.
Australia
is
member
of
the United
of
Nations, ANZUS, Organisation for Economic Co-operation and Development (OECD), World Trade
Organization, Asia-Pacific Economic Cooperation, and the Pacific Islands Forum.
Capital
Canberra
3518.48S 1497.47E
Largest city
Sydney
.Commonwealth of Australia
Official languages
None
National language
English
Demonym
Government
Australian
Aussie
Federal parliamentaryconstitutional
monarchy
Monarch
Elizabeth II
Governor-General
Prime Minister
Tony Abbott
AUSTRALIA
GOVERNMENT
POLICY
Chief Justice
Robert French
Australia is a constitutional
Legislature
Parliament
Upper house
Senate
Lower house
House of Representatives
1 January 1901
Statute of
- Westminster
Adoption Act
Australia Act
monarch of the
3 March 1986
Area
Total
-
Population
2014 estimate
23,682,900] (51st)
2011 census
21,507,717
Density
2.8/km2 (233rd)
The executive: the Federal Executive Council, in practice the GovernorGeneral as advised by the Prime Minister and Ministers of State; [95]
The judiciary: the High Court of Australia and other federal courts, whose
judges are appointed by the Governor-General on advice of the Council.
There are two major political groups that usually form government, federally and in
the states: the Australian Labor Party and the Coalition which is a formal grouping
of the Liberal Party and its minor partner, the National Party. Independent
members and several minor parties have achieved representation in Australian
parliaments, mostly in upper houses.
Within Australian political culture, the Coalition is considered centre-right and the
Labor Party is considered centre-left. Queensland in particular, along with Western
Australia
and
the
Northern
Territory,
are
regarded
as
2013
and
resulted
in
a majority
government for
the Coalition with Liberal Party of Australia leader Tony Abbott as Prime Ministerelect. He was sworn into office by the Governor-General of Australia on 18
September.
4
Objective
- Full employment
- Sustainable economic growth
- external stability
- fair income distribution
- efficiency of resource allocation
Full employment-
underproduction of goods and services. It shows the economy operating inside the
production possibilities frontier. Most governments attempt to control
unemployment in order to reduce the waste of resources and satisfy more needs
and wants.
The goal of full employment is closely related to the goal of efficiency in resource
allocation. In this case, we are examining the efficiency with which one particular
resource is used, namely labour.
Sustainable
Economic growth-
Real GDP ( gross domestic product adjusted for inflation) is the most
common way to measure the economic growth of an economy from year to year.
The Australian Bureau of Statistics (ABS) defines GDP as the 'unduplicated value of
production that occurs in Australia in a particular period'. This definition recognises
that the calculation only includes the value of finished goods and services in the
economy. Intermediate goods, such as the sand used in concrete manufacture or
the gold used in computer chips, are deducted from the final measure of GDP, and
are not counted twice thus the term 'unduplicated'.
Income distribution-
Allocative efficiency - resources allocated to the most valued uses and least
opportunity cost
Research Methodology
Research is systematic, controlled, empirical and critical investigation of
hypothetical propositions about the presumed relations among natural phenomena.
(Kerlinger, 1973). Research is the pursuit of truth with the help of study,
observation, comparison and experiment; the search for knowledge through
objective and systematic method of finding solutions to a problem.
The ways involved in research process:
Milestone 2:
Economic Analysis of Australia.
The economy of Australia is one of the largest capitalist economies in the world, with
a GDP of US$1 trillion as of 2013.Australia's total wealth is 6.4 trillion dollars In 2012, it
was the 12th largest national economy by nominal GDP and the 17th-largest measured
by PPP-adjusted(Purchasing power parity (PPP) is a component of some economic
theories and
is
a
technique
used
to
determine
the
relative value of
different currencies). GDP, about 1.7% of the worldeconomy. Australia is the 19thlargest importer and 19th-largest exporter. The Reserve Bank of Australia publishes
forecasts of the economy quarterly.
The Australian economy is dominated by its service sector, comprising 68% of GDP. The
mining sector represents 10% of GDP; the "mining-related economy" represents 9% of
GDP the total mining sector is 19% of GDP. Economic growth is largely dependent on
the mining sector and agricultural sector (12% of GDP ]) with the products to be
exported mainly to the East Asian market.
The Australian Securities Exchange in Sydney is the largest stock exchange in Australia
and
in
the
South
Pacific and
ranks
9th
in
the
world
in
terms
of market
Australia is a member of the APEC, G20, OECD and WTO.The country has also entered
into free trade agreements with ASEAN,Chile,NewZealand,Japan and the UnitedStates.
The ANZCERTA agreement with New Zealand has greatly increased integration with
the New Zealand economy and in 2011 there was a plan to form an Australasian Single
Economic Market by 2015.
Industry
Mining
Coal is mined primarily in Queensland, New South Wales and Victoria. 54% of the
coal mined in Australia is exported, mostly to East Asia. In 2000/01, 258.5 million
tonnes of coal was mined, and 193.6 million tonnes exported. Coal provides about
85% of Australia's electricity production. In fiscal year 2008/09, 487 million tonnes
of coal was mined, and 261 million tonnes exported.Australia is the world's leading
coal exporter.
Australia's Argyle mine is the second largest diamond mine in the world estimated
to produce 12.6 million carats in 2014, worth over $500 million.Argyle is known for
producing some of the worlds most valuable fancy pink and red diamonds.
Manufacturing
The manufacturing industry in Australia has declined from 30% of GDP in the 1960s
to 12% of GDP in 2007.
Agriculture
Agriculture contributes 3% of Australia's GDP at the farm gate and when valueadded processing beyond the farm is included this figure rises to 12%. 60% of farm
10
Tourism
In the financial year 201011, the tourism industry represented 2.5% of Australia's
GDP, at a value of about $35 billion to the national economy equivalent to $94.8
million a day to the Australian economy.[ Domestic tourism is a significant part of
the tourism industry, and was responsible for 73% of the total direct tourism
GDP. The 201011 financial year saw a record number of overseas arrivals in the
financial year, with 5.9 million short-term visitor arrivals to Australia (588 extra
visitors a day). Tourism employed 513,700 people in Australia in 201011, of which
43.7% were part-time. Tourism also contributed 8.0% of Australia's total export
earnings in 201011.
11
Media
In 201112, Australia was ranked 30th out of 179 countries in accordance to press
freedom. Media is a strong industry in Australia, with Fairfax Media and News
Corporation representing two of the countries largest media companies.
Education
School attendance is compulsory in Australia, from the age of 5 up until
approximately 16 (although it varies between each state and territory).Australia
also has an adult literacy rate that was estimated to be 99% in 2003.
In 2004, the average educational acquirement of the adult population in OECD
countries was 11.9 years. This is based on the duration of formal educational
programmes. Australia ranked relatively highly in the study, with the population
recording slightly over 12 years in education, ranking similarly to many European
countries such as Sweden, Ireland and Poland. Australia was, however,
outperformed by Canada, Germany and the United Stateswhich all measured
close to 14 years in education.
In the Programme for International Student Assessment, Australia regularly scores
among the top five of thirty major developed countries (member countries of
the Organisation for Economic Co-operation and Development). Catholic
education accounts for the largest non-government sector.
University attendance in Australia is expensive, particularly in comparison to other
developed nations such as the New Zealand, Canada, France and the United
Kingdom.
Energy
DEVELOPMENT INDEX
Australia - Human Development Index
Date
HDI
2013
0.933
2012
0.931
2011
0.928
2010
0.926
2008
0.922
2005
0.912
2000
0.898
1990
0.866
1980
0.841
Chart Title
1
0.8
0.6
0.4
0.2
0
Date 2013 2012 2011 2010 2009 2008 2007 2006 2005
Interpretation: Here in the given graph shows that HDI value is gradually
increases year by year. Australias HDI value for 2012 is 0.931in the very high
human development categorypositioning the country at 2 out of 187 countries
and territories. Between 1980 and 2012, Australias HDI value increased from
0.841 to 0.931, an increase of 10 percent or average annual increase of about 0.3
percent.
13
Inflation rate
14
were also higher for alcohol and tobacco (+1.1 percent), mainly due to the effects of
the federal excise tax increase from September 2014, and for recreation and culture
(+0.6 percent).
Consumer prices rose 0.5 percent in the September quarter, compared with a rise of
0.5 percent in the June quarter.
Unemployment rate
in
in
of
of
of
15
Interpretataion:
The Gross Domestic Product per capita in Australia was last recorded at
37492.85 US dollars in 2013. The GDP per Capita in Australia is equivalent
to 297 percent of the world's average. GDP per capita in Australia averaged
24280.15 USD from 1960 until 2013, reaching an all time high of 37492.85
USD in 2013 and a record low of 13356.10 USD in 1962. GDP per capita in
Australia is reported by the World Bank.
16
was
also
able
The Commonwealth
to privatise several
Bank was
sold
in
large
three
government
parcels
between
enterprises.
1991
and
1996. Qantas was sold in two parcels, one in 1993 and the other in 1995, and
the Commonwealth Serum Laboratories was floated in 1994. Telstra was sold off in
three parcels in 1997, 1999 and 2006. One result of these reforms was a marked
increase labor productivity, and a reduction in government spending as a
proportion of GDP. The Australian Stock Exchange Limited (ASX) was formed in
1987 through the amalgamation of six independent stock exchanges that formerly
operated in the state capitals. Each of those exchanges had a history of share
trading dating back to the 19th century.
This process of economic reform and restructuring continued under the Co-alition
Government led by John Howard which took power in 1996. The Howard
Government established a Goods and Services Tax (2000), established a national
Productivity
Commission,
and
further
deregulated
labor
markets
under WorkChoices in 2006. The result of the process of economic reform is that
Australia is now one of the most open economies in the world. It was enjoyed over
two decades of economic growth, coupled with low inflation and relatively low
unemployment.
The 1980s economic reforms, intended to diversify the national economy and make
it more resilient, were introduced after the mid-1980s decline in the terms of trade.
This is a chart of trend of gross domestic product of Australia at market prices
estimated by the International Monetary Fund with figures in millions of Australian
Dollars.
For purchasing power parity comparisons, the US Dollar is exchanged at 0.98 Australian
Dollars.In recent times Australia has received financial growth in the mining industry.
This has been a major contributing factor of a high Australian dollar.
18
Australias economy has been one of the most resilient in the OECD during the
recent economic crisis, boosted by demand for its commodities from China. The
country recorded only a solitary quarter of economic contraction, with growth
increasing 1.2% in 2009 . Australia recorded consistent fiscal surpluses in the years
leading up to the economic crisis due to favourable economic circumstances and a
sound fiscal framework. In 2009, the fiscal balance shifted into negative territory,
with Australia recording a deficit of 4.0% of GDP. Gross debt has remained
relatively stable at around 20% of GDP, significantly below the OECD average . The
Australian economy rebounded by 3.1% from June 2009-June 2010, and the OECD
projects it to experience solid growth again in 2011 boosted by domestic demand
and a booming export sector.
19
Balance of payment
In trade terms, the Australian economy has had persistently large current account
deficits (CADs) for more than 50 years. One single factor that undermines balance
of payments is Australia's narrow export base.
Dependent upon commodities, the Australian government has endeavoured to
redevelop the Australian manufacturing sector. This initiative, also known as
microeconomic reform, helped Australian manufacturing to grow from 10.1% in
19831984 to 17.8% in 20032004.
There are other factors that have contributed to the extremely high current
account deficit in Australia such as lack of international competitiveness. [109]
However, as Australia's CAD is almost entirely generated by the private sector, as
outlined in Professor John Pitchford's 'Consenting Adults Thesis' in the early 1990s,
there is an argument that the CAD is not a significant issue. Historically, Australia
has relied on overseas capital to fill the gap between domestic savings and
investment, and many of these investment opportunities could not have been
20
pursued if Australia did not have access to foreign savings. This suggests that
Australia's apparently low savings level and CAD are not necessarily a significant
problem. As long as the investment that is being funded by overseas capital inflow
generates sufficient returns to pay for the servicing costs in the future, the increase
in foreign liabilities can be viewed as sustainable in the longer term.
Milestone 3:
The current scenario of Australia economy
Economic overview
The Australian economy has experienced continuous growth and features low unemployment,
contained inflation, very low public debt, and a strong and stable financial system. By 2013,
Australia had experienced more than 20 years of continued economic growth, averaging 3.5%
a year. Demand for resources and energy from Asia and especially China has grown rapidly,
creating a channel for resources investments and growth in commodity exports. The high
Australian dollar has hurt the manufacturing sector, while the services sector is the largest part
of the Australian economy, accounting for about 70% of GDP and 75% of jobs. Australia was
comparatively unaffected by the global financial crisis as the banking system has remained
strong and inflation is under control. Australia has benefited from a dramatic surge in its terms
of trade in recent years, stemming from rising global commodity prices. Australia is a significant
exporter of natural resources, energy, and food. Australia's abundant and diverse natural
resources attract high levels of foreign investment and include extensive reserves of coal, iron,
copper, gold, natural gas, uranium, and renewable energy sources. A series of major
investments, such as the US$40 billion Gorgon Liquid Natural Gas project, will significantly
expand the resources sector. Australia is an open market with minimal restrictions on imports of
goods and services. The process of opening up has increased productivity, stimulated growth,
and made the economy more flexible and dynamic. Australia plays an active role in the World
Trade Organization, APEC, the G20, and other trade forums. Australia has bilateral free trade
agreements (FTAs) with Chile, Malaysia, New Zealand, Singapore, Thailand, and the US, has
a regional FTA with ASEAN and New Zealand, is negotiating agreements with China, India,
Indonesia, Japan, and the Republic of Korea, as well as with its Pacific neighbors and the Gulf
Cooperation Council countries, and is also working on the Trans-Pacific Partnership Agreement
with Brunei Darussalam, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, the
US, and Vietnam.
rate)
GDP - real growth rate
GDP - composition by
sector
agriculture: 3.8%
industry: 27.4%
services: 68.7% (2013 est.)
NA%
Labor force
agriculture: 3.6%
industry: 21.1%
services: 75% (2009 est.)
Unemployment rate
Unemployment, youth
ages 15-24
total: 11.7%
male: 12.4%
female: 11% (2012)
Household income or
consumption by
percentage share
lowest 10%: 2%
highest 10%: 25.4% (1994)
22
Distribution of family
income - Gini index
30.3 (2008)
35.2 (1994)
Budget
Public debt
Agriculture - products
Industries
Industrial production
growth rate
Exports - commodities
Exports - partners
Imports
Imports - commodities
Imports - partners
Reserves of foreign
exchange and gold
Debt - external
Exchange rates
Fiscal year
1 July - 30 June
24
Milestone 4:
SWOT Analysis
Developing a plan for Australia's economic prosperity, we
analyse the outlook for the Australian economy over the next century in a novel
way; taking a SWOT analysis a tool more commonly used in business planning
and strategy, and applying it to a nation.
Weakness
Weaknesses can't always be overcome, but it's imperative that they are
understood and acknowledgede in planning. So what limitations are we facing right now and into
the future?
W1 PRODUCTIVITY GROWTH
W2 STATE & FEDERAL RELATIONS AND TAX TRANSFER SYSTEM
W3 INFRASTRUCTURE DEFICIT
Opportunities
25
26
Whether this budget will prove successful in bringing down unemployment rates
remains to be seen. According to the unemployment rate forecast provided by the IMF,
unemployment is only expected to see a marginal decrease to 5.025 percent by the
27
end of 2012. After which, the unemployment rate from 2013 to 2015 should remain
constant at 4.8 percent.
Findings
Australia has enjoyed an uninterrupted run of twenty-three
consecutive years of economic growth. All the more impressive
given that this period was straddled by the Global Financial Crisis
(GFC). Such an extraordinary feat involves a mix of good
management and good fortune. This continues today perhaps in
equal measure.
While the mining investment boom may have ended, the
capacity expansion has translated into materially higher volumes
that continue to drive exports. The Reserve Bank had been
concerned about the end of the mining investment boom for
some time and was hoping that lowering interest rates would
help lift consumption to supplant the decline in investment. As if
scripted, lower interest rates have led to appreciating asset
prices (shares and residential property) that have indeed given
households the confidence to spend once more.
The recent Federal Budget contained a number of unpopular
measures (including welfare cuts and a tax on high income
earners) that have temporarily dented consumer confidence. The
likely net impacts from the proposed initiatives however are likely
to be minor.
On balance the short term outlook remains positive. Low interest
rates are likely to continue to provide tailwinds to residential
housing construction. In addition, higher share and house prices
should continue to make consumers feel wealthier, supporting
consumption.
Despite this positive backdrop, an uneasiness persists for two
main reasons. Firstly, our long held view of the impending fallout
28
29
30
33
MILESTONE 6
References
1. search.proquest.com
2. googlescholar.com
3. economy.com
4. australiangdp.org
5.tradingeconomics.com
34